Do I need business insurance?
You might have a business plan but what happens when your business doesn’t, er, go to plan? You’ve invested time, money and effort in making sure your startup gets off the ground. Naturally, you want to protect it from any setbacks.
Short of conjuring up a crystal ball that can see into the future, how do you do that?
The easy answer is: with business insurance. Like any type of insurance, it covers you in scenarios where your business’s finances or reputation would otherwise take a hit.
It’s essential kit for SMEs and startups, where small problems can easily spell big trouble further down the line. Problems like an employee who takes a tumble at work. Or a client who claims he didn’t get what he thought he was getting, or what he paid for.
If you can’t resolve things face-to-face, that’s when lawyers get involved. And that could leave you shelling out for court costs, legal fees and possibly compensation, too.
Insurance for small businesses covers all that and more. It offers you support, guidance and financial aid where you really need it. The only trick is deciding what you need (and we’re more than happy to offer a few pointers).
What business insurance do I need?
That depends on your risks. No business is the same, so there’s no off-the-shelf policy that fits them all.
Working out exactly what cover you need doesn’t have to take much time or effort. All that’s needed is a simple brainstorm.
Think about: what you do, where you do it, who you do it with and what you use to do it.
What are the risks associated with those things? What could go wrong and how much is it likely to cost to fix?
If it’s a sum you couldn’t afford to pay out of your own pocket, then you probably need your insurance to cover it.
Which brings us onto the next thing…
What are the different types of business insurance?
There are different types to cover different scenarios. Here’s an at-a-glance guide to some of the most common ones, and when you might need them.
Professional indemnity insurance
This covers you for claims of professional negligence i.e. where a client accuses you of doing something that’s cost them money, or of failing to do what they paid you to do.
This could be for incorrect advice, failure of a recommended service or a simple mistake that’s going to cost money to fix.
For example, offering your client professional advice that fails to deliver results or accidentally breaching their confidentiality by forwarding sensitive documents to a competitor. Many clients insist their suppliers have professional indemnity in place before starting a contract.
Directors’ and officers’ liability insurance
Now this is similar to professional indemnity insurance but is aimed at management level. It covers allegations of wrongdoing made against your company’s bosses.
As company director, the onus is on you to get things right. Not exercising ‘due care’ could prompt anyone with a financial interest in your company to hold you liable for damages.
This insurance typically covers issues like accusations of financial misconduct, health and safety failure and breach of company law. However, it’s best to check the policy wording to see what’s covered.
Public liability insurance
Will cover claims where you’re accused of causing someone injury (like a client, supplier or member of the public) or damaging their things.
For example, someone tripping over a dodgy piece of carpeting in your office, or if you spill coffee over your client’s laptop during a meeting.
Accidents aren’t just limited to your premises. Public liability also covers you when you’re out and about on business. Some clients might even require you to have it before you visit them (especially if they have a lot of expensive stuff lying around).
Employers’ liability insurance
This covers you for claims of accident or injury made by your own staff. It’s the only insurance that’s a legal requirement. Without it, the HSE can fine you £2,500 every day you were meant to have cover and didn’t.
It kicks in when someone in your office gets sick or injured as a result of working for you e.g. if someone sustains back problems from not sitting in an ergonomic chair. And it covers everyone under your roof, including part-timers, contractors, apprentices and temps.
By law, you need to have £5m as a minimum level of cover. Unless you’re a sole trader or a family business that’s not incorporated as a limited company. Then you don’t need it at all.
Office contents insurance
Office contents insurance pays to replace your equipment if it’s wiped out by fire, theft, flood or accidental damage. It applies to your portables (laptops, tablets etc.) and anything you keep in your office (PCs, printers etc.).
This covers damages to the building you work in while business interruption insurance covers the costs of temporarily setting up elsewhere if you can’t work from your usual premises (say if a burst pipe floods the office). It covers your lost revenue too.
If your office is at home, you may well find that your existing home contents insurance won’t cover the items you use for business. So check the policy wording carefully.
Cyber and data insurance
Last but not least, cyber and data insurance. It covers the cost of repairing and restoring your systems, data and website following a breach or hack, and compensates you for lost revenue.
Cyberattacks can put a spanner in the works for any business that uses e-mail, has a website or stores their clients’ data electronically (let’s face it, these days that’s most of us).
Cyber insurance pays your legal fees and any compensation due if you’re sued for losing people’s personal data. It also pays to inform the people affected, helps deal with inquiries by the regulator, and provided crisis PR to protect you reputation.
We’re always happy to talk to SMEs and startups about their insurance needs. If you’d like to speak to a friendly expert, call us on 0345 222 5370 or click here for a quote. Remember, PolicyBee has partnered with Startups Magazine, so you get up to 10% off your professional insurance. Mention ‘Startups Magazine’ when on the phone or use the link to get the discount.