What Type of Insurance Do You Need for Your Small Business?

Put simply, the answer to this question is: “it depends.”

Different types of business insurance offer protection against different threats – from fire, flood and theft to claims of negligence dealt with through the courts. What type of insurance you’ll need will depend on the threat(s) that your particular business is most likely to face.

Of course, hopefully your business will never have to face any threat, but if there’s a chance that it might then it’s worth spending a small part of your annual budget on decent insurance.

You’ll need insurance that is tailored to your particular business in terms of the type of cover and the amount of cover offered. If you have a small business then you may not have much by way of physical assets like business premises, machinery or equipment that needs to be insured against destruction or theft (so you may need to take out business property insurance but not with millions worth of cover). Start-ups rarely have much by way of stock or tools of the trade that need to be covered, but having business property insurance in place early will give you the opportunity to build up some no-claims bonus that will become valuable in the future as your business grows.

If you have anything to do with offering professional advice or services, you should take out professional indemnity insurance worth enough to pay compensation and all legal fees relating to any negligence case brought against you by a client. Only you will be able to put a figure on what that would be likely to cost because you will have an idea of what sort of values your services are worth to your clients (though you could get advice from your prospective insurer if you are very uncertain).

If you come into contact with anyone other than employees (including customers, people who deliver your stock, people who visit your business premises to fix your utilities, passers-by) then you should consider taking out public liability insurance. This would pay for legal fees and compensation amounts if any of those people were to sue you for negligently causing them to be injured or have their property damaged or destroyed. That might be as a result of them visiting your premises, or you visiting theirs (e.g. to repair their laptops, or build an extension to their house). Some customers would insist that you have this type of insurance in place and you should take cover of at least £1milliion, though it’s worth asking customers what level of cover they would expect you to have (some customers would ask for even greater cover to be put in place).

Finally, if you employ anyone under whatever arrangement you must have employers’ liability insurance in place to pay for legal fees and compensation if your client were to sue you for negligence.

Shop around and compare quotes for the insurance you feel you need, and check the small print for any exclusions that would make that policy worthless for your particular business.