If you are starting up a new business there will be an enormous list of things you have to think about, and one area you need to give consideration to is insurance. The type and amount of insurance you will require will depend on the nature of the business you are starting. The first thing is to have a good understanding of what each type of insurance is for and whether it is a legal requirement for you to have any. You will then be in a much better position to consider your own situation and what insurances you are going to need.
Is Any Insurance Compulsory?
The main form of business insurance that some companies have to have by law is employee liability insurance. This is a requirement under the Employers Liability (Compulsory Insurance) Act of 1969 and you need to have this if you employ any staff other than yourself. There are exceptions if you only employ direct close family members, but other than that only certain public bodies and organisations are exempt.
All other forms of insurance are optional, apart from from people working in a few particular professions. For example, accountants and solicitors need to have professional indemnity insurance and horse riding businesses need to have public liability cover.
What Is Liability Insurance?
There is often confusion about what liability insurance is and the different names and types of cover available. Basically there are two types of cover you need to understand. The first is the employers liability protection, which is compulsory and discussed above. This is to protect your staff and to protect you against claims for illness, illness, etc. You have to have at least £5million worth of cover for this, but most policies offer £10million.
The other type of liability policy is public liability insurance, which is also known as third party cover. This is optional and is intended to protect you against claims from third parties, in other words anyone other than your employees. Typical examples of claims are from customers or members of the public being injured or having property damaged. This can range from tripping up on your premises to one of your team accidentally breaking something while working in a customer’s home.
The question to ask yourself about public liability cover is whether you will have anyone coming onto your place of work or whether you or your staff will be working on other people’s property or in public areas. If either of these is the case, you would be well advised to have a plan in place to guard against such claims.
Building and contents insurances are things you are likely to be already familiar with. You will need these to cover any place of work that you occupy. An additional consideration if you are engaged in sales of products is stock cover to reimburse you for the loss of your stock in the event of a fire, etc. Your normal building or contents policy will not cover you for replacing your stock.
Professional indemnity insurance is highly recommended if you provide professional advice to clients in any form. If you were found to offer inaccurate or misleading advice and a client suffered a loss as a result, they could claim against you. Related to this is product liability protection, which is about claims arising from the sale of faulty goods. This may be needed even if you do not manufacture the goods yourself. Retailers or wholesalers can also be held responsible in certain circumstances.
If you are starting your own business in a small way, such as working for yourself from home and not employing anyone else, you may well manage without any insurance at all. However, if you provide professional advice, work somewhere other than at home, have visitors to your place of work or go onto clients’ properties, you would be well advised to have some basic protection in place.
Always compare quotes from several insurers before making any decisions.