By Lynne Gowers on 8th May 2017

Are you covered? Our essential guide to business insurances

Most of us have various types of insurance policy for our homes, cars, pets and for when we travel. In all these aspects of our everyday lives we hope for the best, but insure for the worst. The same should go for business insurance.

Whether you are a limited company contractor, freelancer or small business, it makes good sense to mitigate risk by having appropriate professional insurances in place.

Here is our guide to the essentials.

Why take out business insurances?

Business insurance is all about protecting you and your business should the worst happen. If a claim should be made against you, the right insurance could be the difference between sink and swim. If you are an employer, employers liability insurance is a legal requirement.

As well as your own peace of mind, business insurance offers reassurance to your clients. Indeed, many contracts require certain levels of cover as a condition of acceptance, so it is sensible to have policies in place from the get-go.

So let’s take a look at the various types of business insurances and why you would need them.

Professional Indemnity

Essentially Professional Indemnity (PI) insurance is to cover you and your business against negligence. If you make an error in the performance of your duties or otherwise cause your client financial losses, they may put in a claim against you.

PI covers any damages you have to pay out as a result of such a claim and also your legal costs. Aside from negligence, bear in mind that this type of insurance covers loss of data or documents, intellectual property breaches and cases of libel or defamation.

When you take on a job or project there will often be a contractual obligation for a certain level of Professional Indemnity cover. It is worth checking the small print to make sure you and your company meet this requirement, otherwise you could be held personally liable if things go wrong.

Public Liability

Public Liability insurance covers against the risk of accidents or incidents which affect third parties, resulting in them making a claim.

Examples include damage to property, injury to third party persons and legal costs. Even very minor incidents can result in massive third party claims, enough to put you out of business several times over, so it is worth considering this type of policy carefully. Aside from that, most clients will insist on having Public Liability cover in place before you start work, in which case it isn’t really optional.

Employers Liability

Employers Liability insurance is a legal requirement where your business has employees – including family if you are a limited company. It is often sold along with Public Liability as a combined policy.

Even if you are the sole employee of your limited company, often contracts use standard wording which makes Employers Liability insurance obligatory.

It is also important to note that this type of insurance will provide cover if you have a substitution clause in your contract or if you are employing a spouse or family member in the business.

If you are the only employee of your limited company and own more than 50% of the total share capital of the business, you may not necessarily require Employers Liability cover. However, it is always best to check with those in the know.

Other types of business insurance

Depending on the nature of your business, your personal circumstances and your risks and liabilities, there are various other types of professional insurance you may wish to take out.

These include:

  • Personal Accident cover – in the event of a workplace accident, this type of policy provides a weekly benefit until you are fit to return to work. In the very worst case scenario it pays out a lump sum on death or permanent disablement as result of an occupational accident. Personal accident claims are the most common of all business insurance claims, so it definitely merits thinking about.
  • Directors and Officers Liability – this type of policy covers businesses against failings such as breaches of legislation and financial malpractice. For example, it protects against investigation from HMRC and protects the financial assets of the company Director(s). With HMRC enquiry activity at a record level this type of cover may be worth considering. Boox can also provide a specific policy to cover your accountancy fees should your business be investigated by HMRC.
  • Income protection and critical illness cover – while not business insurance as such, you may want to factor this type of cover into your financial planning particularly if you are a contractor or own your own business. As you are not covered by any company scheme, this type of policy offers long term benefits if you should become ill and are not able to work.

The cost of business insurance

As with so much in business, it all comes down to the bottom line! The cost of business insurances varies according to several factors, including the size and nature of your business, your turnover and how many staff you employ. However, it is money well spent – the risks may be small but the stakes are high.

We’ll put you in touch with the experts

We have a number of insurance partners who fully understand the specific insurance needs of contractors and small businesses. They provide competitive packages and a fuss-free, friendly service. Contact us for details.

Written by Lynne Gowers
Disclaimer Although we attempt to ensure that the Information contained in this publication is accurate and up-to-date at the date of publication it may not be comprehensive, we accept no liability for the results of any action taken on the basis of the information they contain and any implied warranties, including but not limited to the implied warranties of satisfactory quality, fitness for a particular purpose, non-infringement and accuracy are excluded to the extent that they may be excluded as a matter of law.

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