I've Launched a Business: What Insurance Do I Need?

September 30, 2022

Arranging insurance for your new business is crucial, but it can be a daunting task if you don’t know where to start. In this insurance guide for small businesses, we tackle which policies you should consider putting in place. Let's get started.

Employers’ liability (EL) insurance 

Employers' liability insurance is the only type of insurance that you’re required to have by law. You must obtain this insurance as soon as you employ staff. Employers' liability insurance will cover your legal and compensation costs if a staff member suffers an injury or becomes ill because of their work. The policy must cover you for at least £5 million and must be taken out with an authorised insurer on the Financial Conduct Authority Register. 

There are some exemptions to this rule. You may not be required to take out the insurance if you only employ certain family members or if the person you employ is usually resident outside the UK. 

It’s worth noting that fines for non-compliance are steep – the Health and Safety Executive (HSE) can levy fines of £2500 for each day that you’re not properly insured. On top of this, you can also be fined £1000 for not displaying your EL certificate or for failing to provide it at HSE’s request. 

Other types of insurance 

You may wish to consider taking out certain other policies to give you peace of mind that you’ll be covered should any issues arise - what type of policies you choose to take out will depend on the nature of your business, but here are a few options to consider below.

Public liability (PL) insurance 

Public liability insurance will cover you for claims made by members of the public, for instance for an injury sustained whilst on your premises or for damage caused to their property by a member of your staff. Legal costs and compensation can be costly in this scenario and this type of policy could help mitigate your potential losses. You may also find that certain customers will place you under a contractual obligation to take out public liability insurance before they’ll do business with you.  

Product liability insurance 

If you’re designing, manufacturing or supplying products, it may be prudent to take out product liability insurance. This will help cover your costs in the event of a claim from any person injured by a faulty product. Undertaking a product recall can also be a very costly exercise and this type of insurance may also help to mitigate those costs.  

Professional indemnity (PI) insurance 

If you’re providing professional services or advice and you make a mistake, or a client suffers a loss as a result of your advice, this type of policy will help to cover you for any legal costs or compensation costs from resulting claims. If you’re providing regulated advice, your regulator may require that you have this sort of insurance in place and it is not uncommon that clients receiving professional advice will require this sort of insurance to be in place under the terms of their contract.

Directors’ and officers’ (D&O) liability insurance or management liability insurance

As the owner and/or director of a business, you’ll be required to make many crucial decisions and spin lots of managerial plates. We’re all human, and in the event you make the wrong call or drop the ball - for example, if you make an error in financial reporting - this type of policy will help you cover the cost of defending any such claims and may cover the cost of any compensation you’re directed to pay. 

Cyber insurance

As businesses are more and more reliant on online processes, the risk of cyber-attacks and data breaches has increased. Following the introduction of the GDPR, data protection has been in the public eye more than ever, and the fines (not to mention the risk of reputational damage) can be high. Cyber insurance will cover legal costs, compensation and in some cases, fines (where legally insurable). Certain cover will also extend to PR crisis management and support with dealing with customers (for example, where you need to inform them of a breach), which could be invaluable in terms of damage limitation.

Insurance particular to your business needs

Have a think about where your biggest risks lie and consider whether there may be a policy to help mitigate those risks. Common examples include environmental insurance or construction all risks insurance. It may be prudent to speak with an insurance broker as they will be able to advise you what insurance policies are available and also explain to you what your policies actually cover, so you don’t have any nasty surprises when you come to make a claim. 

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