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What is business insurance?

Business owners can protect their livelihood by getting business insurance that covers physical damage to property and/or equipment.

What are the factors which may affect the business insurance premiums?

There are many factors which can affect the premiums you are quoted, including -

  • Scale of your business
  • Type of work you do
  • Claims history
  • Business experience
  • Cover you require for the business
  • Location of business

Does my business need liability insurance?

It is possible for your company to require liability insurance if -

  • It has visitors/guests coming to the site
  • It offers consultation services for a charge
  • It employs and/or supervises individuals
  • you are not protected legally by union membership

What are the various types of business insurance?

Some of the business insurance options are -

  • Public liability insurance cover
  • Business assets insurance cover
  • Commercial building insurance cover
  • Professional indemnity insurance cover
  • Employer's liability insurance cover

Business Insurance

Should anything go wrong business insurance is there to protect your company from any financial losses. It can help towards legal fees and compensation should a buyer not pay you, it can cover damage to the property you own and also cover you if a member of the public or an employee wants to make a legal claim against you.

Business owners are able to add additional bolt-ons policies to their normal building and contents cover and the main 4 are;

1. Public Liability Insurance

This insurance protects your business should a member of the public launch legal action and seek compensation

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2. Employer Liability Insurance

Any business with employees must, by law have this form of cover. It protects a business should one of its employees take legal action to sue the business.

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3. Business Interruption Insurance

This insurance covers a business for loss of revenue due to an event such a fire which has burn down your office. Whilst buildings insurance will cover the cost of the repair, business interruption insurance will cover you for the loss of revenue whilst your business is not operational as a result of the fire.

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4. Product Liability Insurance

This insurance product will cover your business in the event a claim is made against a product you sell or make which has caused a member of the public to be injured or suffered an ailment caused by the product you make or sell

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Public liability insurance

We are all humans, and because of this we are imperfect and we make mistakes and accidents happen. Some businesses, will have constant contact with members of the public and sometimes a customer may get injured and seek compensation against the business. With so many injury claim firms that operate on a no-win, no-fee basis, there is an increased risk of a claim from a member of the public. Public liability insurance could very well offset the cost of such claims

What specifically is public liability insurance?

If a member of the public or a client has fallen ill or been injured and in extreme cases, it has resulted in the death of the third party (client or member of the public), and a compensation claim is made against you public liability insurance could pay out on your behalf for the claim against your business and any legal fees associated with the incident. Companies that don’t have public liability insurance run the risk of encountering huge financial losses should an accident happen.

What things are covered with public liability insurance?

Public liability insurance will mainly cover 3 areas

Cost of Compensation

Should a customer or a client injure themselves at your business property, they could launch a compensation claim which could run in to the thousands. Your public liability insurance will pay for that claim up to the value of the policy, even if you are working at a client location and you’ve damaged something of your clients, public liability insurance would cover the cost of repair.

Cost of Barristers and Solicitors

If a member of the public or a client has pursued the matter against your business in a court of law, the legal costs could be huge. Public liability insurance could pick up the cost of those solicitors and barristers fees

Cost of Repairs

If you or an employee damages something belonging to a member of the public, or one of your clients, be it on-site or off-site, public liability insurance will cover the cost of the repair

What doesn’t Public Liability Insurance Cover?

Public liability insurance will not cover you or your employees. So, if an employee makes a claim against you and your business, public liability insurance will not cover you for that, you would need employee liability insurance.

If your property is damaged, public liability insurance will not cover it. However, your buildings and content cover should.

Why would you Need Public Liability Insurance?

Public liability insurance is not mandatory but definitely advisable, and some trade bodies will require members to have public liability insurance, for example (but not limited to); builders, electricians, gardeners, plumbers and cleaners.

Whether you run a thriving business employing dozens of people, or you are just a sole trader, public liability insurance will protect you should a claim be made against your company.

What is the Cost of Public Liability Insurance?

It will very much depend on individual business factors and needs as to how much you’ll be expected to pay for public liability insurance, this includes the cover level you would like for the business, the location of the business, any past claims and the type of business.

Businesses that have heavy equipment or equipment that pose a health risk could face higher premiums than those that are office-based. So, a car workshop or restaurant will have higher premiums than office-based company as the risks will be higher.

What is employers’ liability insurance cover?

It is a policy which protects you and your business if a claim is made by an employee and even an ex-employee.

What does employer liability insurance cover for a business?

If an employee makes a claim against you, employer liability insurance will cover the claim and the legal costs.

What happens if you don’t have employer liability insurance?

If you don’t have employer liability insurance and you have people working for you, you could be fined up to £2500 per day. There are a small number of exemptions like family run businesses that are not operating as limited company.

How much cover would a business need for employer liability insurance?

Most businesses are required to have at least £5m in cover in their policy, but £10m is the standard cover amount. It can also be combined with indemnity insurance and public liability insurance

Is employer liability cover expensive?

No, they start from as little as £5 per month but certain businesses in higher risk sectors will pay more.

Business Interruption Insurance

As a business there could be a day or a number of days that totally out of your control, your business is not able to operate and the loss of revenue could cripple your business. If you’re running a retail business what would you do if there was a fire and the whole building burnt down? How long would it take to become operational again?

The great thing is that insurers have designed a product that will help both small and large businesses deal with that loss of revenue should a calamity like flooding or a fire which has caused the business to become inactive.

What is Business Interruption Insurance Cover?

This policy designed for large and small businesses to cover losses in revenue due to an unexpected and unforeseen incident.

For example, if a retail shop has been damaged by fire, the business buildings and content insurance may cover the cost of repairs and replenishment of goods, it will not cover the loss of revenue whilst the business is not operational. So, whilst you still have fixed overheads you need to pay like employee salaries and other bills you don’t have any income coming in for a period of time. For some businesses this could spell doom. Business interruption insurance will cover for such an eventuality.

What is business interruption insurance?

It is an insurance policy to cover for the loss of earnings due to calamity hitting the business such as a flood or fire.

Is business insurance required?

It is not a legal requirement but if you rely on a fixed premises for your business it is worth thinking about adding business interruption insurance when you compare business insurance. The key things to think of are; How much assets does your business hold? How long would it take to get back operationally if a disaster such as flood were to hit your business? How many staff would you have to pay while your business is not making any money and trying to get back to being operational?

How about contractors that work off-site, will having business interruption insurance make sense?

If as a contractor you have an office, think about what interruption could be caused by a fire. How long will it take you to become operational and what the cost would be in missed opportunities due to you spending time getting the office back up and running.

What type of ‘interruptions’ does business interruption insurance cover?

  • The obvious one is storm, flooding and fire which has caused the business to lose income
  • The breakdown of equipment essential to the business, for example, a Pizzeria that’s pizza oven has broken down.
  • There’s an obstacle preventing you, your staff and customers entering the business premises causing a loss in revenue
  • A business that has been vandalised
  • Damage occurring at one your customer sites or one of your suppliers sites which has affected your trade

More specialised policies tailored to businesses that have computers as the mainstay of the business can purchase a more tailored business interruption insurance

What the top causes for claiming business interruption insurance?

  • 1. Fire is the most common cause
  • 2. Being a very windy country, storms comes 2nd
  • 3. Machinery breaking down or being damaged
  • 4. Recalling of products
  • 5. Vandalism and criminality, this is the 5th most common claim. Certain areas will be more prone for this type of claim
  • 6. Flooding causes huge disruption and in recent years it has become more frequent
  • 7. An establishment collapsing is quite common cause for a business interruption insurance claim
  • 8. Power interruptions could occur after a storm or during a flooding are also a common cause for claiming business interruption insurance

Will business buildings and content insurance cover any losses?

If you have building and contents insurance cover you’ll be covered for damages to the building and the assets within but not for the losses incurred while the business is not running or hampered by the damage and is running at less than 100%.

Product liability insurance

Does your business manufacture or sell products? What is your contingency plan if you have a massive recall of a product? As a business owner, these are very important questions to ask. Some businesses without adequate level cover have failed tragically as a result of not having product liability insurance

What Specifically is Product Liability Insurance?

Product liability insurance is a level of cover designed to help businesses cope with situations where a member of the public or client has sustained injury or received damage to an item of theirs due to a product your business has manufactured, sold or both. Product liability insurance will cover you and your business should the incident arise.

What Things does Product Liability Insurance Cover?

If your business makes, sells or does both, and a product has become faulty and has caused a member of the public to become ill or injured which in turn results into a lawsuit being launched, product liability insurance will help cover the compensation claim. Product liability insurance will cover a product for 3 years after its manufactured but policies with longer time frames are available.

To give an illustrative example. If you sell jam and one of your customers has found broken glass in the jar and has sought compensation, then product liability insurance will cover the cost of the compensation.

Is product liability insurance mandatory?

It isn’t a legal requirement but if you manufacture or sell goods it's worth thinking about because customers can claim millions in punitive damages. Big businesses are not the only ones that can be sued, even if you’re a sole trader which sells imported goods, you could be held liable should something go wrong with one of the items you sell.

What is the right level product liability cover?

The level of cover really depends on what you see as a business to be adequate. Typically, most businesses will look for cover from £1 million to £5 million, but higher levels of cover are available.

It should be worth noting, if a claim is being made for £1.25 million and the level of cover is £1 million, then the shortfall of £250k will have to be found by other means.

What is product liability insurance?

It's an insurance policy that is designed to cover products you manufacture or sell that causes injury or damage to a member of the public. The member of the public then makes a claim against your company for compensation. Product liability insurance will cover the cost of compensation.

What Specifically is Product Liability Insurance?

Product liability insurance is a level of cover designed to help businesses cope with situations where a member of the public or client has sustained injury or received damage to an item of theirs due to a product your business has manufactured, sold or both. Product liability insurance will cover you and your business should the incident arise.

What Things does Product Liability Insurance Cover?

If your business makes, sells or does both, and a product has become faulty and has caused a member of the public to become ill or injured which in turn results into a lawsuit being launched, product liability insurance will help cover the compensation claim. Product liability insurance will cover a product for 3 years after its manufactured but policies with longer time frames are available.

To give an illustrative example. If you sell jam and one of your customers has found broken glass in the jar and has sought compensation, then product liability insurance will cover the cost of the compensation.

Is product liability insurance mandatory?

It isn’t a legal requirement but if you manufacture or sell goods it's worth thinking about because customers can claim millions in punitive damages. Big businesses are not the only ones that can be sued, even if you’re a sole trader which sells imported goods, you could be held liable should something go wrong with one of the items you sell.

What is the right level product liability cover?

The level of cover really depends on what you see as a business to be adequate. Typically, most businesses will look for cover from £1 million to £5 million, but higher levels of cover are available.

It should be worth noting, if a claim is being made for £1.25 million and the level of cover is £1 million, then the shortfall of £250k will have to be found by other means.

Is product liability insurance cover compulsory? It isn't required by law to have product liability insurance but certain commercial contracts may mandate you to have the insurance in place for a certain level of cover for product liability.

How much cover should you get for product liability insurance?

This is very much dependent on you, most businesses will look for cover between £1 million and £5 million.

What situations would a business be held liable for defective products?

Situations where a business would be held liable would include the following;

  • If your business manufactured an item
  • If your business's brand is on the packaging or on the item itself
  • If your business has repaired the item
  • If your business has imported the item from outside the EU
  • If your business cannot prove who the manufacturer of the item is
  • If the manufacturer of the item has become insolvent.

For the reasons above, a business that sells and manufactures items should have in place product liability insurance.

Is product liability insurance tax deductible?

Yes, as it is classed as a business cost.

Business Insurance Frequently asked questions

The advantage of business insurance is that is can protect small companies from such things as liability claims or physical damage to property and equipment.

Business insurance generally covers things that are a necessity for your business or recommended to cover. You can find out more here: business insurance explained

The main ones are:

  • Professional indemnity insurance
  • Public liability insurance
  • Employers' liability insurance
  • Business premises insurance, often called commercial buildings insurance
  • Business assets insurance, often called business contents insurance
  • Other specialist policies

If, during the course of your business activity, you injure a third party or cause damage to their property, public liability insurance will cover the cost. It is highly advisable for you to take this out or you could face bankruptcy if someone makes a public liability claim against your company.

Employers' liability insurance offers protection for employees in the event they claim compensation as a result of being injured or becoming ill due to their work. This is a legal requirement for all UK-based employers.

This type of cover is advisable if:

  • You offer advice or services for a fee
  • You or your employees regularly work off site
  • You have visitors to your business premises
  • You employ or supervise people
  • You are not legally protected by union membership

When you take out your policy, check you insure your property and its contents accurately.

Some of the other factors that have an impact on cost are:

  • How much cover you need
  • Size of your business
  • Type of work you are engaged in
  • Location
  • Previous claims
  • How long you've been in business

Employers' liability insurance is the only aspect of business insurance that is a legal requirement.

Business interruption insurance provides cover in the event you lose money as a result of not being able to trade or work. An example is if theft, damage or loss of stock or equipment occurs. It also covers any additional costs you may need to get your business running again.

Employers' liability insurance is the only feature of business insurance that is a legal requirement. You may find the other areas of business insurance are not appropriate to your business type; however, it is important to protect your business, your employees, the interests of your clients and the general public, with adequate cover.

For answers to any further questions, see our business insurance guides

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