To keep things simple we’ve split this guide into two sections:
- Insurance which is compulsory
- Insurance which is not compulsory but you should consider.
Business Insurance which is compulsory for all businesses
Employers’ liability insurance
Employers’ liability insurance covers cost of compensation (including legal costs) if you are held liable for an injury or illness to an employee of your business. It must be as a result of the work they undertake for your business. If your business has any employees you are required to hold an employers liability insurance policy BY LAW.
The minimum requirement is a £5 million limit of indemnity however most insurers offer £10 million as standard. The law also requires you to make your employers liability insurance certificate visible at your place of work. An employers’ liability insurance certificate will always be provided by insurers when you take out an insurance policy. The HSE is responsible for ensuring companies follow the law and can fine companies up to £2500 per day for not holding employers liability insurance.
There are certain circumstances in which you are not legally required to hold employers liability, such as:
- Family businesses, i.e. if all your employees are closely related to you. But importantly this does not apply to family businesses which are incorporated as limited companies
- Business employing only their owner where that employee also own 50% or more of the issued share capital in the company
(Health and Safety Executive, HSE40rev4)
As with personal insurance, it is a legal requirement to take out motor insurance if your business has vehicles. As a minimum you are required to hold third party liability insurance. Third party motor insurance covers personal injury or property damage to third parties as a result of a collision caused by you, or anyone of your employees driving a company motor vehicle. This must be unlimited for personal injury and at least £1 million for property damage.
Whilst third party liability is the minimum requirement, to provide more extensive protection to your business you should consider a comprehensive motor policy. Remember any vehicle is a business asset and should that asset be damaged or destroyed it automatically impacts your balance sheet!
If motor vehicles are core to your business such as delivery or a taxi service you will be able to purchase a specific policy for your trade!
Business insurance which is not compulsory for all businesses, but you should strongly consider
We use the term not compulsory for “all businesses” carefully, as for certain trades and professions, the insurance detailed below will be compulsory. For example surveyors and accountants cannot trade without professional indemnity insurance and riding establishments cannot trade without public liability.
Professional indemnity insurance
Professional indemnity covers the cost of compensation to clients if your professional advice causes them to lose money. It is designed for ‘professionals’, so those that offer specialist advice, designs, consultancy or any other expertise. It covers you or your business when you make an error or mistake in your work. If you provide professional advice, designs or consultancy you should strongly consider buying PI. Claims of this nature are ever increasing.
Professional indemnity insurance is also known as PI, professional liability, or indemnity insurance. It is compulsory for certain trades such as solicitors, accountants, financial advisors or surveyors.
Public liability and public liability insurance
Public or General Liability, covers claims against you or your business from third parties for bodily injury and property damage as a result of your business activities. I.e. if someone trips over your laptop lead whilst you are working at a clients premises.
Products liability covers the same claims as public liability, but liability that arises directly from the goods you are producing, selling or repairing. So claims for bodily injury or property damage arising from your products.
This insurance is a must in our eyes, especially public liability, but also products liability of you are producing, selling or repairing goods.
Property insurance and business interruption insurance
This covers your business property, i.e. the contents of your office, shop, warehouse or any other business premises, and any buildings that you may own. It may also extend to cover your portable equipment, such as damage to laptops and tablets.
Business interruption covers the loss of income and/or additional expenditure whilst your business premises or property is out of action as a result of damage. Again it’s possible to purchase specific policies for certain trades such as shop insurance packages and office insurance packages.
Think of this as home insurance for your business, you wouldn’t take a risk not to insure your house!
Directors and officers insurance
Directors and senior managers can be held personally liable for not running a business with due care and skill. This could be a claim from shareholders or government bodies or regulators. One example is a director being held personally liable for corporate manslaughter.
Certainly worth considering if you are running a medium sized limited business. If you are running a very small limited company in a service sector you may choose to go without this insurance, but bear in mind that this provides protection for your personal assets and premiums start at a very low level for very small limited companies. You cannot by directors and officers insurance for sole traders or partnerships.
Legal expenses insurance
Legal Expenses Insurance covers the cost of pursuing legal action or defending your business against legal action. But be aware it will only cover specific legal actions such as employment disputes, compensation awards, property protection, bodily injury and tax protection. The small print is essential on such policies as they may only provide cover in circumstances in which you as a policy holder have followed very strict criteria. Sometimes these criteria are so strict that if you had followed such criteria there is little such chance a circumstance may have arisen in the first place!
Worth while? Depends on your budget, policies are often cheap and may even be included free of charge within your office or shop policy.
Need any advice, please feel free to contact us to discuss your business requirement. Remember we can help you decide what insurance you need and what you don’t.