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Whether you’re a sole trader or the director of a limited company, if you run a very small business and you don’t have any employees, you probably fall into the informal bracket of ‘micro business.’
Simply Business provides insurance to thousands of micro businesses across the country, so they know a thing or two about the insurance covers that are useful for small businesses. Read on to find out more about some of the covers that could come in handy for your business.
Is business insurance a legal requirement?
Most micro businesses are under no legal obligation to have business insurance. The only type of business insurance that’s required by law is employers’ liability insurance, and that’s only mandatory if you have employees and you’re not covered by any of the legal exemptions.
However, depending on your profession, your regulator or professional body may insist that you have certain types and levels of insurance cover, so it’s worth checking with them. Also, bear in mind that some clients – public sector clients in particular – may ask that you have business insurance in place before they’ll work with you.
Public liability insurance
Public liability insurance is an insurance cover that’s useful for businesses that come into contact with the public, and could face compensation claims as a result. This means that public liability insurance is very popular with hairdressers, beauticians, shop owners, cafe owners and tradespeople.
It can cover the cost of compensation pay-outs and legal fees if a member of the public sues your business for injury or damage. For example, if a customer slipped on a wet floor in your shop and injured themselves, if you dropped a brick onto a parked car while doing some building work on a house nearby, or if you visited a client’s office and spilt tea over their computer equipment, you could face a compensation claim that your public liability insurance could cover. Public liability insurance often includes product liability insurance too, which can cover you if you’re sued for damage or injury caused by a product you’ve manufactured or sold.
Professional indemnity insurance
Professional indemnity insurance can cover you if your client sues you for negligence or making a mistake in your work. As you’d expect, this makes it a particularly popular cover with consultants, and other businesses that provide advice.
You may find that you need it to satisfy the requirements of your regulator or professional body, for example if you’re a solicitor, a financial adviser, an accountant, an architect, or a healthcare professional.
Professional indemnity insurance usually covers compensation claims that arise because of negligence, loss of data, and unintentional confidentiality or copyright breaches. For example, if you’re making a film for a client and you use music without obtaining the right permissions, or if you give incorrect advice about IT security and your client’s systems go down as a result, your professional indemnity insurance could cover you against any subsequent compensation claims.
Most insurers offer between £50,000 and £5 million of professional indemnity insurance, but remember to check the requirements of your regulator before choosing your cover level.
Other types of business insurance
Professional indemnity or public liability insurance will usually be your core business insurance covers, but you can also add other insurance to your policy, depending on what would be useful for your business.
As already mentioned, there’s employers’ liability insurance, which covers compensation claims from employees who have suffered injury or illness as a result of their work.
If you have a business premises, you might want to consider business buildings insurance. If you rent your premises, the landlord will usually insure the building, but you may want to get business contents insurance to cover your furniture and equipment from risks like theft, fire, and flood. You can also take out tools insurance and stock insurance, and there’s plant and machinery insurance if you’re a tradesperson.
Other business insurance options include business interruption insurance, which can cover the cost of lost business and revenue if your business is affected by an event like a flood or a fire, as long as it’s an event that’s covered by your other insurance (your buildings insurance, for example). There’s also business legal protection insurance, which can pay for legal fees if your business faces something like an employment tribunal or an HMRC tax investigation.
Buying your business insurance
As you can see, there are various types of business insurance available to cover the different risks that small businesses can face. Here are some tips for choosing and buying your business insurance.
- Think about the risks your business faces when you’re choosing your cover types.
- Check your client contracts and the requirements of your professional body to see if they stipulate particular cover and cover levels.
- Compare quotes from a number of insurers to make sure you’re getting the right cover at the right price.
- Read your business insurance policy documents carefully to make sure you understand what’s covered and what isn’t under your policy.
- If any of your business details change, make sure you let your insurer know.