Whether you’ve just started a new business or have been trading for some time, you’re likely to have times when cash-flow is tight. It’s tempting to reduce your expenses by cutting out seemingly less important expenses such as business insurance.

Unfortunately, if you take the "it won’t happen to me" line of thinking, it could end up being an extremely expensive mistake. The fact is, many businesses suffer losses which could have been mitigated with the right protection. Protecting your business against the many risks it could face should be taken seriously and form part of your business strategy or planning.

There are two main categories of business insurance: protection for assets and liabilities, and protection for you as the owner and director of your business. There’s another set of two categories, as well: insurance that is compulsory, and insurance that isn’t required by law (but which could be considered necessary depending on your circumstances).

Compulsory Insurance

There aren’t too many compulsory insurance types for small businesses in the UK. These are limited to liability protection, which provides you with a means of affording legal costs if an employee, customer, or member of the public takes legal action against you. One of the most important is employer’s liability insurance, which is compulsory if you employ at least one person in addition to yourself. All UK businesses must have a minimum of £2 million worth of liability insurance. In addition, you must display an employer’s liability certificate at your place of work.

Motor vehicle liability insurance is also needed. This covers your liability for any third parties who are injured while using your business vehicles. Public liability insurance is also compulsory if you operate a business where clients or customers are present at your premises whether an office or shop. Any injury suffered by a customer while on your premises can potentially incur legal liability, and if you regularly have customers at your place of business this protection is certainly needed.

Finally, there’s product liability. If your business sells products (rather than offering services) you may be held liable for defects that cause injury or death when the products are used. This can occur even if you didn’t actually manufacture the item in question. Product liability is therefore essential whether you’re in manufacturing or retail.

Non-Compulsory Cover

Non-compulsory insurance is often used to protect your business equipment and assets from damage and theft. This type of cover, while not required by law, can be just as essential because without it you could be left high and dry if fire, theft, or another unforeseen event damages your business equipment assets, or even prevents you from operating altogether.

• Property and buildings: If your business is home-based, a quick call to your home insurance company will sort this out (you may end up paying a higher premium if your business increases the property’s risk). If your business is on its own premises, you’ll need separate insurance.
• Contents: This insurance covers equipment, assets, and stock used and stored on your premises.
• Indemnity: Not compulsory (unless you’re a member of a specific profession, such as accountancy), but an important one to have if you’re in a business where being accused of professional misconduct could mean legal action.
• Business Interruption: The cost of replacing equipment or stock is probably your primary concern if fire destroys your property or assets. Business interruption cover considers the long-term costs, such as the losses you might suffer while your premises are being rebuilt or repaired, or while your equipment is being replaced.
• Keyman cover: Any business can be vulnerable to the loss of important staff members. Keyman cover helps minimize the negative effects if you lose a key employee through sickness or death.
• Increased cost of operation: If an accident allows you to continue operating your business, but at a higher cost due to temporary expenses such as hiring additional staff or renting workspace, this insurance helps you meet those extra costs.

Whilst you can buy many of these policies separately, you can also get pakaged policies that cover the common requirements of certain trades and professions. You can search a directory of insurers together with reviews and further buying information at the business insurance companies index. You can also find further help and advice on buying insurance for your business at the Business Link website.

Tags: commercial insurance | commercial insurance | business insurance | business insurance | small business | small business | employers | employers | liability | cover

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