Understanding business insurance and whether you need it

Does your business need insurance?

Managing your costs when running a business is important, and when it comes to purchasing insurance you may be asking yourself whether it is necessary.

All businesses will face some level of risk and insuring against these risks is likely to be a good idea.

When deciding whether you need business insurance, there are three main questions to ask yourself:

1. Could you afford the cost of a claim? Whether it’s a claim against your business, or a claim you need to make, the cost of any such claim will likely far outweigh the amount you spend on purchasing your insurance. In this respect having business insurance in place could actually save you money in the long run.
2. Do you have a legal obligation to purchase insurance? The only insurance that is mandatory in the UK is employers liability insurance, if you employ any staff you’ll need to take out appropriate insurance. You could be fined if you don’t have it in place.
3. Will insurance open up more business opportunities? Depending on the industry you work in you may find having insurance in place provides more opportunities for your business. If you work with clients you may find they require you to have adequate insurance to enter into a relationship; likewise, if you’re a member of a professional organisation or trade body, you may find that your membership requires you to have certain types of cover in place.

When should you get insured?

It’s never too early to get cover in place. As soon as your business is liable or exposed to risk you should consider insurance. Even before you start taking on work you could be exposed to risk, for example if you have purchased equipment such as laptops you may want to cover this before you start trading officially.

There is some flexibility in how you can purchase your insurance, for example you can buy now and set a date in the future for your cover to start, or, in some cases cover purchased now can be retroactive. This means that even if you’ve been trading for a while without adequate insurance you may be able to get cover which provides protection for any claims made relating to a period before you had the insurance in place.

What does business insurance cover?

Business insurance is a broad term which includes a number of different insurance products. These products are each designed to protect your business against legal and compensation costs arising from a range of risks.

Each cover is different in the protection it provides, and the type of cover you choose to make up your business insurance should include cover that protects you specifically against the risks posed both to your business and the risks posed by the operations of your business to others.

Insurance product names may be confusing but getting the right combination to protect your business is possibly simpler than you think! Having the right insurance in place for your needs will make sure you are adequately covered should you need to make a claim, and you could also save money by removing ones that are not relevant for your business.

What types of insurance are right for me?

There are many different types of cover available, and those that are right for your business will depend on what it is you do, the industry you work in and the size of your business. Some common types of cover that most businesses should consider:

Public liability

If a member of the public is injured, or their property damaged due to your business’s negligence, public liability can cover legal and compensation costs associated with the incident. It’s one of the most popular types of cover for businesses across all industries.

Professional indemnity

Providing legal and compensation cover for businesses that offer professional services, including advice and consultancy, professional indemnity is another popular type of cover. This cover is particularly important for companies that work contractually and includes claims like breaches of contract and acts of errors or omissions.

Employers liability

This cover is mandatory for employers and it’s worth being aware that if you employ people and you don’t have employers liability insurance, you may receive a fine of up to £2,500 for each day you didn’t have it!

Similar to public liability insurance in terms of what is covered, however employers liability concerns employees rather than members of the public. So this means legal and compensation costs associated with accidental injury to your employees or damage to their property during the course of them carrying out the actions the business asks of them.

Cyber liability

Cyber liability is designed to cover risks that come with storing and handling this data, such as accidental privacy breaches, hacking and cybercrime and business interruption as a result of a cyber security breach affecting your systems or those of your suppliers.

An essential cover for most businesses, particularly those working with personally identifiable information (PII), including payment card information (PCI) or medical records (PHI). Find out more about business cybersecurity and why it’s important for your business.

What information do you need to get covered?

Getting insurance cover for your business is usually not as complicated as it seems, often you can get a quote and set up your cover online in a matter of minutes. To complete a quote for insurance you’ll typically need the following information to hand:

• Your business type - are you a sole trader, limited company or partnership?
• What your business does - what industry do you work in, what type of work do you carry out?
• Your business turnover - how much money do you expect to receive for your work over a 12 month period?
• Where your business operates - does your work cover the UK only or will you be serving other territories too?
• Details of your employees - if you have any
• Whether you have cover in place currently - and if you do, your renewal date if you know it

Depending on what your business does, there may be some other information required to get the right cover for your needs.

The Cashplus Business Bank account comes with some very helpful features such as receipt capture, spending insights and also integrates with most leading accountancy software. Find out more about the Cashplus Business Bank account, where you can apply for an account in minutes and get an instant online decision.

This content was created on February 10th 2022