If you’re new to the world of business insurance, then it can all seem a bit complicated. From professional indemnity, to public liability, directors and officers, to cyber, there is a lot of new lingo to get your head around.
But you’ll be pleased to hear that it isn’t as impenetrable as it might initially seem. Here we’ll give you the lowdown on the insurance policies that you require as a small business, those you should consider, as well as some tips on what to think about when buying.
Are there any policies that I must have for my small business?
Yes, if you are a small business that employs staff, then you are legally required to have employers’ liability insurance (EL). EL will protect you if one of your staff, or a former staff member, claims they suffered an illness or injury as a result of their work for you. If that happens, EL will cover any legal and compensation costs that you face as a result. You can also be fined £2,500 by the Health & Safety Executive (HSE) for every day you aren’t properly insured.
What other policies might I need?
Public liability insurance
Firstly, public liability insurance, which will protect you if you or one of your team causes injury or property damage to a member of the public. Accidents can happen anywhere, including on your premises, while out filming, attending events, or when visiting clients at their offices. And the potential legal fees and damages following an incident can be huge, which is why PL is so important to pick up the bill. Many businesses are also asked by clients and suppliers to have a certain level of PL, so this is another incentive to ensure you have the right level of protection.
Contents and portable equipment insurance
Another vital cover is contents insurance, which protects all the physical tools, tech and equipment that you use to run your business. While we know it doesn’t bear thinking about, your belongings are potentially at risk of theft, loss or damage due to fire or flood, and would likely be extremely expensive to replace.
There are two types of contents cover to think about: office contents, which will cover anything on your premises, including furniture, fit-out and fixed equipment, and then portable equipment cover, which is for all the bits you take out with you, including smartphones, laptops, tablets and cameras. Most businesses choose to invest in both.
Professional indemnity insurance
For small businesses who offer a professional service or advice, professional indemnity insurance is a key policy to add to your list. It will protect you if a client suffers – or claims to suffer – financial losses or reputational damage as a result of a mistake or bad advice on your part. Like PL, you could also find your clients request you have PI, to ensure that you’re both protected if the relationship goes awry.
Directors’ and officers’ liability insurance (D&O)
One that often gets overlooked is D&O – sometimes called management liability insurance – which is specifically for the founders and directors of your small business, rather than the business itself. D&O will protect those with management responsibilities against any claims that they have personally done something wrong, covering any defence costs, fines and compensation demands that they could face. With company directors at risk of disqualification or worse-case scenario a prison sentence, it makes sense to cover your back. Plus, you’re likely to find that investors want you to have this, so it’s an important cover to sort out if you’re sourcing funding.
Startup founders and directors have to be particularly careful when purchasing D&O, to ensure they’re covered for some of the biggest risks they can face running an early-stage business. Firstly, ensure your policy covers you for insolvency, and secondly, check that you’re covered for claims made by large shareholders (those who have more than 15% of the business). Many traditional D&O policies won’t include these, so ensure you find one that does.
Cyber liability insurance
Lastly, with the huge rise in cyber-attacks and data breaches seen in recent years and with businesses holding increasing amounts of data, cyber liability insurance is growing in importance. This will protect you in the event of a cyber incident, covering any legal and compensation claims, system downtime, fines under GDPR (where legally insurable), as well as providing legal, IT, PR and customer service support to help you to respond effectively following a breach.
How to get insurance for a small business
As a time-poor small business, no doubt you’ll want to get your insurance sorted as quickly and efficiently as possible, without spending hours searching around. Thankfully, with Digital Risks, you can do it all super quickly online, plus our flexible monthly subscription model means you can change or cancel your cover whenever you need to.
How much is small business insurance?
This article has been brought to you in partnership with Digital Risks.
Small business insurance: An essential guide