Business insurance types


Types of business insurance


Business insurance is a general term for different types of insurance designed for all aspects of business protection.

Click on the links below for a summary of each of these business insurance types.



Commercial Vehicle insurance

If you drive a vehicle then you will need vehicle insurance.

Make it clear to the insurance company that the use of the vehicle is for business or business and private purposes and attempt to correctly estimate the expected mileage.

Also tell the insurance company of tools or items of value you are likely to carry in the vehicle.

If the actual mileage is trending to be more than as indicated in your initial insurance application then contact the insurance company and have it amended. You do not want to have any issues if and when a claim is made.


Employer’s Liability insurance (EL)

Any business employing people is required to have Employer’s Liability insurance.

This includes: full-time, part-time, contractual, short-term, temporary, interns, students and volunteers.

The minimum cover is usually £5 million.

Subcontractors

You do not require Employer’s Liability insurance for subcontractors when the subcontractor is a defined and separate practising entity. For example, a subcontractor that uses its own employees and tools or works under its own direction can be considered as a distinct entity from your business.

It is for the subcontractor to arrange their own insurance in that respect.

A subcontractor that is labour only and working under your direction and using your materials and tools is legally considered as an employee and must be covered with Employer’s Liability insurance.


Public Liability insurance

Public Liability insurance in the UK is not compulsory but it does protect you and your business at two levels.

1. Protection against injury to people or damage to property whilst visiting your premises.

Examples include someone tripping over in your office reception and injuring themselves or a forklift in your warehouse reversing into a visiting customer.

2. Protection against injury to people or damage to property whilst your business is undertaking work off your premises.

An example would be dropping a hammer from the top of a ladder whilst working on a building and injuring a passer-by.

Some companies will require you to take out Public Liability insurance as a condition of having a contract with them.



Product Liability insurance

Product Liability insurance protects you and your business against the effects of compensation claims and legal fees when a product you have sold has caused death, injury or damage to property.

This cover is important because without it, your business will always be vulnerable to compensation and legal costs if a claim was ever made.

Based on the law of eventuality, let’s assume that one day this will happen. In addition, the more successful you are, the more products you sell, the more is the risk that a successful compensation claim could one day wipe you out.

Although in terms of product liability, there is a difference between the product manufacturer and the reseller; the vulnerability to a claim may not be as different as first thought. Generally, it is the manufacturer that is liable but that depends on a number of factors.

All parties will seek to mitigate liability and therefore the impact of comprehension costs; and that means things can get messy.

For example, a manufacturer may claim that the product was sold wrongly (given the wrong instructions as to its application or use) or promised servicing by the reseller or the end user did not use or carry out instructions properly.

If you as a reseller refurbished, serviced or repair an item that again you may be liable.

Even if you are only the reseller, if the product is labelled with your company name then you may be liable. You can also be liable if the manufacturer no longer exists, cannot be found or is located outside the EU.

This is why sourcing Product Liability insurance is a crucial part of business preparation.


Professional Indemnity insurance

Professional indemnity insurance protects businesses or individuals that offer a service or advice to other businesses.

Example: You may advise a business on a particular matter and that advice causes the client to lose money. The client may then sue you for losses incurred.

In the normal course of business, issues and mistakes can often happen, professional indemnity insurance will then protect you from such situations.

If you are considered as an authority, a professional or expert by the client then professional indemnity insurance is important.

Professional indemnity insurance can cover the following elements (make sure you confirm this with your insurer).

  1. Mistaken or wrongful advice provided.
  2. Breach of confidential information or intellectual property.
  3. Mishandling of client data.

If you are setting up or running a business in any of these or similar sectors then check you have adequate professional indemnity insurance. This list is not exhaustive.

  • IT support businesses and consultants
  • Management and Business Consultants
  • Marketing Consultants
  • HR Consultants
  • Accountants, bookkeepers and credit controllers
  • Project Manager consultants and contractors
  • Creative and media consultants, design agencies including freelance
  • Surveyors
  • Engineers


Business Buildings insurance

Business Buildings Insurance protects the business premises against the financial cost of damage. This includes a complete rebuild of the property if necessary.

The arrangement for Buildings Insurance cover will be different depending on whether you own or lease the building.

1. Leasing the property

The insurance cover required to be sought by you will depend on the arrangement you have with your landlord. Get this clarified and confirmed in writing. Where there are holes in the arrangement, then negotiate or get insurance to fill the gaps.

Landlords usually arrange this insurance and pass the cost on to tenants as part of the rent or itemised cost.

2. Buying the property

If you are buying the building through a mortgage or direct loan then you are likely to have already arranged buildings insurance when finalising the loan.

3. Owning the property

It is for you to arrange and pay for buildings insurance.

Remember that the property should be insured for the cost of rebuilding and not the market value. The insurance company should be able to advise you on this.

Be sure to periodically review the cost of rebuilding and therefore the insurance cover required.


Business Contents insurance

Business Contents Insurance allows you to claim the value of property lost or damaged on your premises due to fire, accident or theft.


Income Protection insurance

Income protection insurance provides cover in the event of injury or illness. There is also another type that provides health cover for permanent illnesses (this is not medical cost cover).

Each has certain qualifications and restrictions. For example, accident and sickness cover may protect mortgage and other debt payments and permanent health cover may provide up to 50% of your previous income until you retire.



Business Interruption insurance

Business interruption insurance covers that part of your business that incurs financial loss due to the interruption of trading.

In other words, if you have a flood then your buildings insurance will cover the cost of repair to the premises. Your contents insurance will cover the cost of damage to items within the building and your Business interruption insurance will cover the loss incurred due to interruption to your business.

For example:

  • Loss of revenue due to you not being able to conduct business.
  • Loss of customers and contracts.
  • Additional staff costs.
  • Loss of rental income.
  • Cost to rent an alternative premises until the situation is rectified.

Business interruption insurance is often added to a more generally used insurance such as commercial property insurance.


Business Legal Protection insurance

Business legal protection insurance covers the cost of any legal actions or disputes you may incur during the operation of your business.

Typical examples

  1. Employee civil action or tribunal.
  2. Contract disputes.
  3. Customer civil actions.
  4. HMRC tax investigations or disputes.
  5. Property disputes.
  6. Recovery of money owed.
  7. Defence against debt claim.

Insurance products vary so you would have to confirm exactly what is covered. Also be aware that the percentage chance of legal success is likely to be assessed before your claim for legal expense is agreed.



Electronic Equipment insurance

Covers the cost of replacing equipment that is damaged or stolen and the cost of recreating the data lost (to a limit).


Cyber insurance

Cyber insurance protects your business from the consequences of a cyber attack.


Protection can be provided at two levels

1. Protection against internal consequences

The repair and restoration of internal systems, data and websites.

2. Protection against external consequences

Liaison and legal cost representation with regulators and data owners; including lost or compromised data compensation costs.

Cyber insurance protection is particularly potent given GDPR regulations and their consequences.

It is important to note that even with cyber insurance protection, the onus is still with you and the business to ensure reasonable care and due diligence as regards security and data protection procedures.


Stock insurance

Insurance designed to specifically cover stock is particularly important for businesses that depend on stock to trade. Examples include retail (high street and e-commerce) and wholesale.

Insurance companies expect you to take reasonable precautions and measures to protect stock.

Examples:

  • Fire prevention.
  • Flood protection.
  • Security.
  • Procedures and processes to ensure risk of stock damage and theft is minimised.


Personal Accident insurance

Personal accident insurance covers you personally against the financial consequences of serious injury or death caused by an accident in or outside of work.

This is important if you are a sole trader where the financial consequences to the family is likely to be profound if you are the main bread-winner.

Personal accident insurance covers such things as lost income and medical bills.


Director and Officer insurance

Director and Officer Insurance is also known as D&O or Management Liability insurance and is designed to protect directors, partners and company officers from the financial consequences of legal claims.

It is worth noting that although a limited liability company operates as a separate entity and directors are not liable for its debts; the director still owes a duty of care to the company, shareholders, employees and creditors.

The director is therefore vulnerable to any issues and claims made within the context of this duty of care.

Note that Director and Officer Insurance is likely to not protect against all eventualities. It is therefore important to clarify what is and what is NOT protected when making the insurance application.


Goods in Transit insurance

Goods In transit insurance protects you against financial loss due to goods damaged or lost during transit.

This insurance is vital if you are running a courier or haulage company; where the goods being transported is likely to belong to your customer. The value and consequential cost of loss or damage of customer property is unpredictable so adequate protection is crucial.

Protection of goods lost or damaged covers both goods transported by your own vehicles and third party carriers. Transportation both within the UK and international is also covered but always check and confirm the detail before making the final decision of which Goods In transit insurance product you purchase.

Typical examples of cover

  • Theft of goods while in transit.
  • Road and other accidents.
  • Damage or loss of goods during transit.

As with all other insurance, there is an expected standard of due care and attention when making arrangements and executing the task of transporting goods.

For example, leaving keys in the lorry or staying overnight with the back doors open is likely to cause issues when making a claim.



Money insurance

Money insurance protects against money being stolen or lost. This insurance is particularly important if you run a shop, restaurant, hairdressers or any business where a till containing money is in the same place as people usually unknown to you. Money can also simply go missing through accident.

Losing money from a till can have a profound impact on a small business so it is important get cover.

Some businesses can also carry large amounts of cash due either to the nature of the product sold or large deposits taken.

Being able to predict circumstances and the corresponding impact of having to hold varying amounts of money is a detail often overlooked when running a business. Arranging adequate cover removes this headache.

Be aware though that as with all other forms of insurance, due care and attention is expected. Leaving the till open could be an issue when making a claim.


Industry Specific insurance

There are common risks and requirements for protection no-matter what your business sector.

Common examples:

Required protection: property and employees.

Risk: theft, damage and injury.

Protection against: litigation and loss of income.

However, there are opportunities to improve the cost and protection effectiveness of your insurance by exploring insurance products that have been designed for your specific business sector needs.

For example: the daily risks to a retail high street store are different to that of a sheep farmer or a large manufacturing plant.

Exploring sector specific insurance options might therefore present a tailored mix of cover drawing from many of the insurance types covered in this section.

Alternatively, you might want the advantage of flexibility and choose specific items from this section list that matches your budget and priorities.


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