The right insurance can make a big difference when protecting your small business.
However, with so many different types of insurance available, it can seem impossible to know what you actually need. You can’t afford to waste money on unnecessary products, but you don’t want to take unnecessary risks. Sound familiar?
We’re here to explain some of the most common insurance products for small businesses. That way, you can make an informed decision about the ones that will best protect your business.
Professional indemnity insurance
Professional indemnity (PI) protects your reputation from negative allegations. If a client claims your work wasn’t good enough and it’s cost them money, PI will pay any legal fees associated with defending you. If you are at fault, it will compensate your client, and pay any additional costs of redoing the work.
It can help in a wide variety of situations: defamation, negligence, virus transmission, loss of documents, employee dishonesty, intellectual property infringement, breach of confidentiality, and failure of third-party equipment.
And when can you use it? Your customer asks you to design and print some brochures for a conference. On a handful of pages, your client’s brand green comes out all wrong. And nobody notices until the brochures are at the conference. It’s too late to redo the work, but your professional indemnity will compensate your client to try to salvage your relationship.
Public liability insurance
This insurance is an essential for anyone who meets clients or members of the public face-to-face, either at your premises, or somewhere else.
If you’re to blame for an injury or property damage to a third party, public liability will pay for legal fees and compensation. These can be very steep, especially when someone’s hurt. Even if you’re not to blame, allegations won’t go away without a strong defence.
For example, your IT set-up might leave a lot to be desired. A trailing cable across your office floor could cause a customer to trip and sprain their ankle. Or perhaps a weak wrist is your Achilles heel. You might spill coffee all over your client’s laptop while discussing your proposal. In either situation, public liability would pay to sort out your mess.
Employers’ liability insurance
If your small business has employees, employers’ liability is a legal requirement. The Health and Safety Executive can fine you £2,500 a day for not having it, as well as £1,000 for not displaying your insurance certificate.
It covers you if an employee suffers an injury or illness caused by their work. It provides compensation, as well as covering any legal fees you have to pay. The only time you don’t need EL is if your business is a family company, and all members of staff are closely related. Although freelancers aren’t technically ‘employees’, if you control their working environment, you might still need employers’ liability insurance.
A common EL claim might be if you fail to provide proper training to a member of staff, or you don’t address their concerns about a problem with their workspace. Either of these could lead to an injury or health problem that you’d be liable for.
It’s not just the work you do, but the things you use to do it, that need protecting. Office insurance comes in many different parts. There’s cover available for:
- General contents
- Portable items
If anything happens to your insured property – whether that be theft, loss, accidental or malicious damage – your insurance will pay for a suitable repair or replacement. It includes cover for things like fire and flooding.
When calculating your level of cover, it’s important not to leave anything out. That stapler or charity-shop-scanner might not be worth much on its own, but imagine if you had to replace it all in one go – that’s a big expense for your business.
This is an add-on available with office insurance, but that doesn’t mean it should be an afterthought. Business interruption insurance ensures unexpected events don’t put your business out of action.
The insurance has two parts: cover for increased costs of working, and cover for missed income. If you have to set up a temporary office while yours is unusable, business interruption insurance will cover the costs. If during this period your income isn’t as high as expected, business interruption will pay the difference so you’re not out of pocket.
You can use business interruption insurance in any situation where you can’t use your normal premises. For example, fire, flood, major theft, or something that blocks your access. Many of our customers use their insurance after periods of bad weather, when fallen trees have blocked their access or caused a power cut.
If you’re not sure what level of cover to choose, always go higher rather than lower. You can never have too much cover, but the consequences of underinsuring can be devastating.
Always make sure your insurer has an accurate picture of your business activities when you buy your policy. If you do something different to what they think you do, there’s a chance they could refuse cover if you have a claim.
Remember: being small doesn’t mean you can’t face negative allegations against your business. What it does mean, is that you may not have the resources to defend yourself without expert help. If in doubt, ask a specialist insurer or broker for advice.