What business insurance do I need?

Chris Andreou

April 21, 2021

what business insurance do i need guide

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Contractors

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 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.

Why do I need business insurance?

Although employers liability insurance is the only mandatory cover (applying to businesses with employees only), for many businesses, insurance is a necessity for two key reasons.

Firstly, most businesses would be unable to afford the cost of a claim.

Secondly, you may find that other businesses or stakeholders (investors, for example) that you interact with require that you have a certain level of business insurance as a prerequisite to working together.

What types of business insurance are there?

This is not an exhaustive list of the types of business insurance products out there, but covers the products you're most likely to want to consider.

Professional indemnity insurance

Professional indemnity insurance covers risks in association with your professional services. It’s a must-have for many businesses.

This is because the majority of businesses do at least one of the following: provide a professional service, handle client data, or work with intellectual property. It’s not a legal requirement, but many clients will insist on your having it as a prerequisite to working with you - and in certain professions, you may find that your regulatory body requires it. 

Public and product liability insurance

Public liability insurance, which often includes product liability insurance as a package, covers your interactions with third parties (by this definition, anyone who isn’t your employee).

It’s a fairly common and straightforward cover; 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.

Product liability follows the same concept, but for any products you sell or give clients (whether you’re the supplier, manufacturer or retailer).

It’s worth noting that even if your business typically doesn’t interact with the public, if you exhibit or trade at events or fairs, the organiser will typically require that you have your own public liability policy in place. 

Business contents insurance

Much like home contents cover, business contents insurance covers your stock, equipment and furniture.

It will often include some level of portable equipment cover, for things like laptops and mobile phones, which are often with you when you’re on the move.

Employers liability insurance  

Employers liability insurance is the only business insurance required by law (for businesses with one or more employees) and is designed to cover workplace injury or property damage claims made by employees.

Some companies may be exempt, such as businesses that only employ immediate family members.

It’s worth checking on this, as not being appropriately covered could incur a fine of up to £2,500 per day for each day that you’ve not been insured! Note that you may also be fined £1,000 if you do not display your employers liability certificate, or fail to show it to inspectors.

Cyber insurance

Cyber insurance is all about protecting risks exposed by your data and computer systems. It’s been embraced by larger, more technologically focused businesses, but is fairly underappreciated in general.

In reality, it’s a cover to consider for any business that collects, stores, or processes information - and certainly one to think about if you’re a digital-first business, such as an online retailer.

With cyber risks being some of the most challenging to protect yourself against, you may decide that getting cyber insurance is a small price to pay for the peace of mind and assurance that if you do experience a data breach or cyber-attack, you’ll have expert support at hand.  

Management liability insurance

Also commonly known as D&O insurance (short for directors and officers insurance), this cover is relevant to you, unless you’re a sole trader.

It’s often misunderstood that personal liability claims are covered under professional indemnity or general liability policies - yet this is rarely the case. D&O cover is the only type of policy which specifically protects those in management positions against allegations of mismanagement.

Business Insurance Guide

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Business Insurance Guide

How do I choose a business insurance policy?

Choosing a business insurance policy is actually fairly straightforward, once you’ve understood your set of risks and determined what you need covered.

Superscript has created a guide to business insurance which includes questions to ask yourself when thinking about which covers you need.

In a more general sense, some good steps to take when choosing financial products are:

  • Check reviews. You’ll usually be able to find these on a selection of the following: Facebook, Feefo, Google and Trustpilot. 
  • Check that customer support is available in a way that works for you. If you aren’t able to make phone calls during working hours, for example, you’ll need a provider which offers support by email or live chat. 
  • Check regulatory ratings. A score of A or higher from A.M. Best, Lloyd’s, S&P or Fitch, suggest a trusted provider.

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

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Guide to employing or hiring contractors

You have an important project at hand, and you require a contractor's specialist knowledge to fill in the skill gap in your team. You're ready to hire-except that you're unfamiliar with the hiring process.

If this is your first time hiring a contractor, our article will guide you through the essentials.

We'll cover the following:

  • Sourcing for contractors
  • Assessing contractor CVs
  • Interviewing a contractor
  • Payments
  • Contract terms
  • Terminating a contract
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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 a contractor an employee?

Contractors can be self-employed, a worker or an employee. Those who are employed through an umbrella company or an agency could be considered a worker or an employee.

If a contractor is a sole trader or runs a limited company, he or she will then be considered a self-employed person.

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What are the disadvantages of contracting?

The disadvantages of contracting are:

  • Uncertainty: Due to the flexible nature of their working relationships, contractors aren't guaranteed work after the end of assignment or project.
  • Responsibility: Not only is it the responsibility of the contractor to find work, they are also responsible for their own finances.
  • Employment rights: As a contractor, you generally wouldn't find yourself holding employment rights that permanent employees benefit from.
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Do I need professional indemnity insurance?

Depending on the industry you operate in or professional bodies you're a part of, it may be a requirement to have professional indemnity insurance. Alternatively, you may decide that you need this cover if your business gives advice, offers a professional service, or handles client data or intellectual property.

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Is business insurance a legal requirement?

Employer's liability insurance is the only cover that is mandatory by law for most companies who employ at least one employee.

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How do I become a contractor?

To become a contractor, you need to:

  • Do your research: The first step you'll need to do is to conduct in-depth research, and think through various important factors-from finances and tax implications, to lifestyle and business opportunities-to ascertain if becoming a contractor is the right decision for you.
  • Decide on how you'll operate: As a contractor, you may operate as a sole trader, through your own limited company, or work with an umbrella company or recruitment agency.
  • Develop a business strategy: Strategic planning isn't set in stone-but working out a plan is still helpful, as it is a way for you to consider multiple perspectives, identify potential opportunities and pitfalls and conceptualise back up plans you could fall back on.
  • Get your business finances and insurance sorted out: Setting up a business bank account, registering a company, determining the level of accounting support you need and investing in business insurance are important aspects you need to sort out before you begin contracting.
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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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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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How to Start Contracting Guide

  • What is a contractor
  • Types of contractors
  • Contractor business structures
  • Contractor accounting
  • Understanding IR35
  • Contractor insurance
  • Banking for contractors
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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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Do I need business insurance?

Having business insurance ensures that you and your business are protected should the worst happens.

These policies can help cover the costs that arise due to property damage or liability claims-without which you'd have to pay for legal claims and damages out of your own pocket. The costs can add up to a significant amount-and can be financially devastating for self-employed workers and small business owners.

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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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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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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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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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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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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 are the advantages of contracting?

The advantages of contracting are:

  • Flexibility: Contractors have a lot more control over their work life often deciding when they work, where they work and how they work
  • Increased earnings: Contractors are often paid more due to their skillset and the flexible nature of their working relationships. Additionally, contractors who operate through their own limited company can benefit from tax efficiencies.
  • Greater development: Often working with multiple clients throughout their career, contractors are exposed to a lot of opportunities to develop their skills and build on their experience in their area of expertise.
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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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Business Insurance Guide

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