When you are feeling positive and enthusiastic in the start-up phase of your business it’s not easy to think of “worst case scenarios” – but that is exactly what you should do, and make sure you have adequate business insurance to cover you should fate deal you a nasty blow.
It’s tempting to skimp on business insurance, especially when you’re just starting out and money is tight. There are some policies, though, that you must have – by law or just as a sensible precaution.
Firstly, if you have one or more employees – even part-time, seasonal or temporary – you are legally required to have employers’ liability insurance. Not only will you be fined up to £2,500 a day (by the Health and Safety Executive) if you don’t have such a policy, but you could risk total financial ruin if the worst happens and an employee is injured or falls ill because of their work and seeks compensation.
The law requires that you have a minimum of £5-million employees’ liability insurance cover, but most insurers offer £10-million as a matter of course.
There are some exceptions to the employees’ liability insurance requirement – for instance if your business is unincorporated (not a limited company), and you are operating as a sole trader or in a partnership, or employing only close family members.
Depending what line of business you are in – and therefore how high the risk of injury or illness for employees is – you should investigate the wisdom of having liability insurance even if you are exempt. Also, don’t just settle for the minimum cover the law demands if this might not be enough if a calamity happens in your particular type of work. Employees of a roofing contractor, for example, will be at far more risk of injury than a solicitor’s clerk.
As well as considering the unpleasant event of having an employee demand damages or compensation for work related injury or illness, you have to protect yourself from members of the public who may do the same. For this you need public liability insurance. This is not a legal requirement, but it is certainly advisable to have cover in place if your work takes in you into the orbit of any members of the public, whether they be customers, suppliers, tradespeople or any other third party.
Policies for public liability insurance usually provide cover from a minimum of £1-million upwards, which may sound excessive, but consider what it might cost you if you were faced with having to compensate a claimant for medical fees, legal representation, loss of earnings, and all sorts of other damages.
Very often insurers offer a “package deal” including employees’ liability insurance along with public liability insurance, which works out cheaper than buying each policy separately.
PURELY PROFESSIONAL
If your business involves giving professional advice or services to other businesses you need to protect yourself from being sued by clients who may find your work unsatisfactory for any reason. It may sound unlikely, but many professionals have found themselves suffering crippling claims from clients who accuse them of anything from negligence to defamation or theft of intellectual property.
Professional Indemnity (PI) insurance covers you for all or most of the disasters that can befall you as a professional worker, but you need to find a policy that will cover all the risks you face in your particular field.
Some professional regulatory bodies, like chartered accountants, solicitors, architects and surveyors, have made it mandatory for members to have professional indemnity insurance. Also, if you are a consultant hiring yourself out to clients, the clients may insist that you have PI cover before they will employ you.
Other forms of business insurance you should consider include the logical ones such as property insurance to protect your assets (including things like tools, equipment or stock), and business interruption insurance to cover you for loss of earnings if unforeseen events prevent you from working.
Beyond the basics, there are a whole raft of business insurance policies available for specialised enterprises. For your own peace of mind as a business owner – no matter how small the operation – make sure you have weighed up all the risks and covered yourself so that no catastrophe will get in the way of success.