What business insurance do I need?

Chris Andreou

June 9, 2021

what business insurance do i need guide
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Introduction

Every small business owner needs some combination of business insurance for financial and legal protection against liability in a crisis.

Yet, with limited resources, it can be tempting to look into cutting costs whenever you can. That could mean deciding to purchase only business insurance that you're legally required to have.  

But that's overlooking the fact that an uninsured accident could potentially sink your business.

In an Inc. article, startup founder Leo Welder shared about his decision to skip out on a intellectual-property litigation insurance while he was in the process of purchasing general insurance policies for his business.

This proved to be a costly mistake. When his company was later embroiled in a lawsuit with a publicly traded company, he wound up paying several hundred thousand dollars in legal fees.

Looking back on his experience, his advice for fellow business owners is: "It's not just a matter of 'Can I afford this?' but a question of 'Can I afford not to have this?'"

With many different types of business insurance available, it can be difficult figuring out exactly what you need.

Here's when our guide comes into the picture. Below, we answer FAQs concerning business insurance.

Why do I need business insurance?

Business insurance is designed to protect you from the everyday risks associated with running your business.

Your insurance needs are specific to your business. We'll help you understand why you need insurance and what type is best for your business. 

Here are the top five reasons why you might need insurance:

1. You provide a professional service or handle client data

In this case, professional indemnity insurance might be prudent; covering you for claims made against you by a client due to errors in your work that have resulted in a financial loss.

2. It's a requirement imposed by regulatory bodies

This is a basic requirement in order to operate in some professions. For example, solicitors, accountants, and some healthcare professionals are required to have professional indemnity insurance.

3. You interact with third parties

Public liability insurance might be worth considering if you interact with third parties such as customers, clients, suppliers, or other members of the public.

This covers you for claims made against you by one of these third parties. It is particularly important in cases where there is an increased risk of a customer being injured, e.g. a company offering adventure sports. Most retail outlets, food outlets, grooming, construction, and tradespeople take out this insurance.

4. You are an employer

Employer's liability insurance is a legal requirement in the UK for businesses that employee one or more employees.

It is in place to cover workplace injury or damage claims made by a member of staff. Some companies may be exempt, including many businesses that only employ close family members.

To check if your business is exempt, review Health and Safety Executive (HSE) guidelines or seek professional advice.

5. You will be investing in property, equipment or inventory

A retailer may hold a large amount of stock. An architect may invest in technology or equipment. A restaurant would invest in ovens. Whatever the case, an insurance policy that covers contents, buildings or stock makes for a prudent investment.

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Business Insurance Guide

Business Insurance FAQs

What are typical business insurance cover amounts?

The amount of business insurance you need depends on your specific business requirements and risk appetite.

It is worth noting that in some cases, you will need a specific type of insurance in place to sign a contract, depending on the situation and company.

The three most popular types of insurance come in the following brackets:

  • Public liability insurance - £1 million to £10 million
  • Professional indemnity insurance - £50,000 to £2 million
  • Employers' liability insurance - £5 million to £10 million

Business insurance is one of those things that no one really likes doing or to think about, but when you need it, you can't imagine what would have happened if you did not have it.

Invest some time to understand what kind of insurance you really need, and use Hiscox, Simply Business or Tapoly to find your policy.

Will subcontractors be covered on my Employers’ Liability Insurance?

Labour-only subcontractors (LOSC) who work under your direction using your equipment are considered to be under your employment. It is a legal requirement that you need to have employers' liability insurance for these subscontractors.

Bona-fide subcontractors (BFSC) are those you hire for their expertise to work under their own direction. These subcontractors use their own equipment, are paid via invoices, set their own hours and work without supervision. They aren't considered as your employees, and as such, are required to provide their own insurance.

Before engaging bona-fide subcontractors, do check that they are licensed and that they, along with their staff have public liability insurance.

Can I get insured if I have not registered my business?

You can get business insurance before registering your business.

When you’re buying your policy, information that your insurer will ask for include your business address, trade type and actual or projected turnover. You may also be asked about your business structure.

Your insurer won't ask about your company registration number (CRN) or other business registration details. As such, you'll be able to buy business insurance while you're in the midst of settling the paperwork you need to set up your company.

Can I get business insurance without a trade licence?

Your licence details aren't required when you buy business insurance, so you may buy your business insurance before your trade licence has been issued. If you're unsure about whether your business requires a trade licence, you may find out using HMRC's licence finder tool.

Bear in mind that you need to get all the necessary paperwork sorted out, and that you have obtained your trade licence before you begin trading.

That's because abiding by all laws and regulations is part of your agreement with your insurer. If you begin trading without a licence, your policy may be rendered invalid, and any claim you make may be rejected.

Business Insurance Guide

What's Inside:

  • What is business insurance?
  • Why do I need business insurance?
  • Types of business insurance
  • Professional indemnity insurance
  • Public and product liability insurance
  • Business contents insurance
  • Employers liability insurance
  • Cyber insurance
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Business Insurance Guide

What's Inside:

  • What is business insurance?
  • Why do I need business insurance?
  • Types of business insurance
  • Professional indemnity insurance
  • Public and product liability insurance
  • Business contents insurance
  • Employers liability insurance
  • Cyber insurance

Can I get business insurance without a trade licence?

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what is an insurance broker guide
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What does business insurance cover? Guide

What does business insurance cover?

Different types of business insurance cover different risks. Public liability insurance covers compensation claims made by a member of the public, while professional indemnity insurance covers you if you're sued by a client. Employers' liability insurance covers compensation claims from employees.

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How much does employers' liability insurance cost? Guide

How much does employers' liability insurance cost?

The price of your employers' liability insurance will vary, depending on the number of employees you have, the industry you operate in, as well as the type and level of risk your business faces most often.

To give you a rough idea, here are a few examples of the approximate costs you can expect to pay:

  • According to AXA, 10% of their employers' liability insurance customers paid £42 or less for their cover in 2020
  • NimbleFins indicated that the average cost of employers' liability insurance ranges from about £61 per year for a single office worker, up to £213 or more for a trade worker for a small to medium-sized business in the UK.

To obtain a more accurate estimate, your best option would be to run an online quote with the insurance provider you're looking to purchase from.

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Public liability insurance vs general liability insurance Guide

Public liability insurance vs general liability insurance

Public liability insurance covers compensation claims made against your business by a third party for injury or damage. For example if a supplier trips on a trailing cable in your shop, or if you visit a client and spill coffee on their computer.

General liability insurance isn't available in the UK.

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What does public liability insurance cover? Guide

What does public liability insurance cover?

Public liability insurance is designed to protect against legal and compensation costs for any accidents that your business is liable for, injuring or causing damage to the property of clients, suppliers, or members of the public.

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Understanding how business liability insurances protects your company Guide

Understanding how business liability insurances protects your company

As a self-employed person or small business owner, having the right insurance is everything.

Most businesses don't consider their doors open and ready for customers without a full battery of liability and premises insurance protection. And for good reason.

Insurance isn't just something you have to have according to laws or industry regulations; it's a type of legal and financial protection that every business needs, no matter how big or small.

While everyone can see the importance of insuring your physical building and its contents, it may be more difficult to see the big picture when it comes to liability insurance. Why do you need so much insurance, why so many layered policies?

That is exactly what we are here to answer today.

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Who is liable for damage caused by a defective product? Guide

Who is liable for damage caused by a defective product?

The party that is held liable will depend on the circumstances of each individual case.

If the injury was due to negligence, the party who was negligent will be held liable.

If the injury was caused by a defective product, the "producer" of the product will be held liable. This is generally the manufacturer. In the event that the manufacturer can't be traced, has gone out of business or is located outside the EU, the importer of the product-such as the distributor or supplier-will be held liable.

A party that places its trademark on the product may also be held liable.

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What is occupiers' liability insurance? Guide

What is occupiers' liability insurance?

Occupiers' liability insurance, otherwise known as public liability insurance covers the occupier of a premises from legal and compensation costs that arise due to injury or property damage to a third party. For instance, if a customer trips over a loose wire at your office and makes an injury claim, this insurance product will cover the legal costs and compensation payment.

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Is public liability insurance tax deductible? Guide

Is public liability insurance tax deductible?

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Do I need public liability insurance? Guide

Do I need public liability insurance?

Public liability insurance isn't compulsory by law, but many businesses decide that they need it to protect themselves from crippling compensation costs, and also to satisfy the requirements of potential clients.

As it can protect you if you're sued by a member of the public, this insurance is particularly important if you interact with customers, suppliers or passersby in the course of your work.

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What business insurance do I need? Guide

What business insurance do I need?

Business insurance is designed to protect you from the risks associated with running a business.

As a business owner, whether you're a sole trader, or running a partnership or a limited company, the onus is on you to think about the risks you face as a business-and to get them covered.

While some risks and their accompanying covers are common to most businesses, others are more niche.

The protection you'll need will depend on the risks your business faces. In this article, our business insurance partner, Superscript explains the types of business insurance you may want to consider.

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What is product liability insurance? Guide

What is product liability insurance?

Product liability insurance is designed to cover legal and compensation costs that are incurred when an individual is injured, or if their property is damaged by your product.

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Can I get business insurance without a trade licence? Guide

Can I get business insurance without a trade licence?

You can purchase business insurance before you obtain your trade licence. However, if you start trading without having the required licence, your policy may be deemed invalid.

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How much does business insurance cost? Guide

How much does business insurance cost?

The cost of your business insurance depends on the nature of your work, the type of insurance you need, and your cover levels. Businesses that are perceived as riskier will usually pay a higher policy price.

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Do I need professional indemnity insurance as a contractor? Guide

Do I need professional indemnity insurance as a contractor?

Covering legal costs and expenses in your defence as well as any damages or costs that may be awarded, professional indemnity insurance comes highly recommended for those providing professional services. Many professions need to have professional indemnity insurance as part of their respective industry body's regulatory requirements and so always double check your contractual agreements.

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What is personal liability insurance? Guide

What is personal liability insurance?

Personal liability insurance protects you from legal and compensation costs due to injury or property damage to a third party.

It is fairly uncommon to take out this type of insurance, as it is unlikely that your personal activities would pose a risk of injury or accident. However, if you're self-employed or a business owner, there's a good chance that you'll be interacting with customers or the general public on a day-to-day basis. As such, taking up public liability insurance-the commercial equivalent of this cover-is something you'd want to consider.

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What does professional indemnity insurance cover? Guide

What does professional indemnity insurance cover?

Professional indemnity insurance is designed to protect you if your client suffers a financial loss as a result of your professional services. It covers the cost of your legal defence and compensation you need to pay to a client for a claim made against you.

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How much employers' liability insurance do I need? Guide

How much employers' liability insurance do I need?

The law requires most employers to have at least £5 million of employers' liability insurance, and the fine is a maximum of £2,500 for every day that you don't have this cover. In practice, most insurers will give you £10 million of cover as standard, so you don't usually have to choose a cover level when you're buying your employers' liability insurance.

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Is product liability insurance required by law? Guide

Is product liability insurance required by law?

While product liability insurance isn't a legal requirement, you may find that manufacturers, suppliers, distributors or retailers you work with will require you to have it.

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What does product liability insurance cover? Guide

What does product liability insurance cover?

Product liability insurance covers compensation claims and legal fees if someone sues you because they've been injured or their property has been damaged by one of your products.

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What is employers' liability insurance? Guide

What is employers' liability insurance?

Employer's liability insurance is designed to cover workplace injury or property damage claims made by employees. It is the only business insurance required by law for businesses with one or more employees.

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How much product liability insurance do I need? Guide

How much product liability insurance do I need?

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What is business insurance? Guide

What is business insurance?

Business insurance is designed to protect you from the risks associated with running a business.

As a business owner (whether you're a sole trader, or are running a partnership or a limited company), the onus is on you to think about the risks you face as a business-and to get them covered.

While some risks and their accompanying covers are common to most businesses, others are more niche. The protection you'll need will depend on the risks your business faces.

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Does public liability insurance cover employees? Guide

Does public liability insurance cover employees?

Public liability insurance doesn't cover claims made by employees. It's designed to cover compensation claims made by a third party - for example a client, a customer, a supplier, or another member of the public - because they've been injured or their property's been damaged by your business.

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Business Insurance Guide Guide

Business Insurance Guide

  • What is business insurance?
  • Why do I need business insurance?
  • Types of business insurance
  • Professional indemnity insurance
  • Public and product liability insurance
  • Business contents insurance
  • Employers liability insurance
  • Cyber insurance
Read Full GuideRead Full GuideCalculate Now

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Is professional indemnity insurance tax deductible? Guide

Is professional indemnity insurance tax deductible?

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Do contractors need insurance? Guide

Do contractors need insurance?

As a contractor working through your own limited company, it is recommended that you are covered by business insurances whether that be for your own peace of mind or in fact something that is mandatory in your contract.

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How much does public liability insurance cost? Guide

How much does public liability insurance cost?

There isn't a standard average price. The cost of your public liability insurance depends on a number of factors, including the type of business you run and the level of cover you select. Businesses that are perceived as riskier will usually pay a higher price for their public liability insurance.

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What is public liability insurance? Guide

What is public liability insurance?

Public liability insurance covers your interactions with third parties (by this definition, anyone who isn't your employee).

If your business causes an injury or property damage to a member of the public, public liability insurance will cover you for the resulting legal and compensation costs.

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What is an insurance broker? Guide

What is an insurance broker?

Insurance brokers are professionals who sell various types of insurance coverage to clients.

Auto, home, health, life, property, and other varieties of insurance all fall under this umbrella. Some insurance brokers work independently and others work for brokerage firms; some deal with individuals, and some elect to work only with businesses.

An insurance broker's job is to help inform clients of how best to handle risk management. They help make it possible for individuals and companies to obtain and provide insurance for themselves, their families, their property, and their businesses.

Within the UK, brokers are regulated on the state level.

They're often required to hold a specialized license that can only be obtained after completing education and testing requirements. The information they learn during the period prior to certification allows them to guide clients and answer their questions without trouble. Brokers seek to help clients understand their liabilities and how to manage those risks most effectively.

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Is employers' liability a legal requirement? Guide

Is employers' liability a legal requirement?

Employers' liability insurance is a legal requirement for most UK businesses with at least one employee. The minimum cover level required by the law is £5 million

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Public liability claim examples Guide

Public liability claim examples

Public liability insurance claim examples:

1. Claims made against an electrician:

An electrician was engaged for the installation of a heating system in a commercial building. However, the installation was incorrectly done and caused a fire resulting in damages to the property, which amounted to £50,000. The electrician's insurance policy covered the cost of damage.

2. Claims made against a furniture assembler:

A cabinet that the furniture assembler had fitted fell from the wall, and caused injury to another contractor. The furniture assembler was required to pay just £250, as his insurance policy was able to cover the majority of the costs (£25,235).

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Errors and omissions vs professional indemnity Guide

Errors and omissions vs professional indemnity

Errors and omissions insurance and professional indemnity insurance are different terms used to refer to the same insurance cover. 'Errors and omissions insurance' is more commonly used in the US, while the term 'professional indemnity insurance' is typically used in the UK.

Professional indemnity insurance is designed to protect you against legal liability for breach of professional duty while carrying out your business activities. For instance, if a client believes that your service is inadequate or if you've made a mistake, the insurance will cover you against claims the client makes against you.

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Contractor & Freelancer Insurance Guide Guide

Contractor & Freelancer Insurance Guide

  • What is business insurance?
  • What insurance you need
  • Legal requirements for insurance for freelancers
  • Legal requirements for insurance for contractors
  • How to find the best policy
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What is a retroactive date on professional indemnity insurance? Guide

What is a retroactive date on professional indemnity insurance?

The retroactive date on your professional indemnity insurance is the date from which you've held uninterrupted professional indemnity insurance, or a date in the past from which your insurer has agreed to cover you.

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Is public liability insurance compulsory by law? Guide

Is public liability insurance compulsory by law?

While public liability insurance isn't compulsory, you should think about taking out public liability as part of your business insurance policy anyway, as it can protect you if someone makes a claim against you for injury or damage to property suffered because of your business.

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Do I need employers' liability insurance? Guide

Do I need employers' liability insurance?

For most employers, it is mandatory to have at least £5 million of employers' liability cover, or face a fine of up to £2,500 per day. There are some exceptions to this rule, however: most public organisations and businesses that only employ close family members (as long as they're not incorporated as limited companies) don't necessarily need to have employers' liability insurance.

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What is contractor insurance? Guide

What is contractor insurance?

There are several types of insurance that a contractor may benefit from. These policies are known as:

Professional Indemnity Insurance - in case a client sues for making a costly mistake whilst undertaking contractual duties such as the loss of data or unintentional breach of copyright.

Public Liability Insurance - in case a member of the public is injured, or property is damaged as a result of the actions of the company (or its employees).

Employers Liability Insurance - in case an employee is injured (or worse) whilst working for the company. Often mandatory for any company's that has more than one working employee.

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What is professional indemnity insurance? Guide

What is professional indemnity insurance?

Professional indemnity insurance covers risks in association with your professional services. It protects your business from legal and compensation costs that arise should a client make a claim against you, under circumstances such as:

  • Defamation and libel
  • Loss of documents or data
  • Professional negligence
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How much professional indemnity insurance do I need? Guide

How much professional indemnity insurance do I need?

You can usually choose between £50,000 and £5 million of professional indemnity insurance. Your regulator, professional body or client contracts may indicate you the minimum amount you need. You should also consider the scope of your projects and the potential compensation demand if something went wrong.

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Can I get business insurance before registering my business? Guide

Can I get business insurance before registering my business?

Yes, you can get business insurance before registering your business.

When you're buying your policy, information that your insurer will ask for include your business address, trade type and actual or projected turnover. You may also be asked about your business structure.

Your insurer won't ask about your company registration number (CRN) or other business registration details. As such, you'll be able to buy business insurance while you're in the midst of settling the paperwork you need to set up your company.

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Business Insurance Guide