What is Business Insurance, What is the Importance?
Small Business Insurance – Why Do You Need It?
According to the Federation of Small Businesses (FSB)’s recent report, almost 6 out of 10 small businesses in UK are charged with crime each year. This is especially in the north and urban areas of UK. While it is difficult to imagine a disaster on your business, the fact remains: disasters happen and it could happen to you! With small business insurance, you can buy yourself a policy that will safeguard you against losses and cover your business under the worst conditions imaginable. Cautious entrepreneurs may get cover for 2 years. Many get 1-year policies too.
Small business insurance is the law. If you have employees, you are by law required to have at least £5 million worth of cover for your business; your employees, labour-only sub-contractors, etc, must be insured against accidents at work.
Finding the Right Small Business Insurance
Do your homework: Talk to other small business owners about the kind of insurance they have got, and where they have got it from. In other words, are there any particular insurance agents, companies, or brokers they would like to recommend? An entrepreneur owning a business similar to yours will be able to help you select special small business insurances you need for your business.
Do your own research as well. Read about insurance companies and their policies in business magazines, economic newspapers, or search online for information. The Internet is an all comprehensive source of information. Use it to its maximum capacity.
Stick to one source: Buy your insurance from one source to avoid getting duplicate coverage policy. It is best to buy small business insurance from an agent who represents several insurance companies. As an independent agent, he/she is less likely to favour any particular company, and instead, help you choose the best coverage from a wide range of vendors.
Talk to agents: Discuss your small business insurance needs with as many insurance agents as possible. It will help you evaluate the types of coverage you need for your business and compare quotes.
Types of Small Business Insurance
Small business insurance can be divided into two categories:
1. Small business insurance you must have by law
Employer’s Liability Insurance
What do you do when an employee who works for you is injured or falls ill due to your negligence? An employee can claim compensation for injury if it is proved that your business is at fault. Employer’s liability ensures your business protection against this cost.
Employer’s liability small business insurance is a legal liability that helps you claim money from the insurance company to pay to your employee. The amount of cover you can get is unlimited, although at least £5 million must be reserved at all times. You are also required to produce an employer’s liability insurance certificate at each place of work.
Due to increased premiums over the last 5 years, many companies are conducting businesses without employer’s liability. Illegal as it is, not having this cover can result in financial ruin, should an employee injured in an accident at work, claim against you.
You can make do without employer’s liability small business insurance if:
- You are not a limited company
- People you employ are your spouse, children, siblings, parents, grandparents, civil partner or any other close family members.
- If you operate as a limited company, own at least 50% of its shares, and is the only employee of the company.
Liability insurance is a must for business owners. Each year, there are almost 400 deaths and 30,000 major injuries at work in UK. Liability insurance, by law, is mandatory for all businesses employing staff and workers. Your small business insurance broker is probably the best person to inform you of the level of liability insurance you need for your company.
By law, if your employees are using their own vehicle for work (other than travelling to work), you need motor insurance (also known as third-party liability) to ensure your employees are fully covered against:
- Motor accident, car crash
- Death or injury from motor accident
- Damage to property
- Theft of vehicle
- Damage from fire
Insurance for Engineering Equipment
The law mandates engineering equipments, such as lifting tackle, pressure vessels, etc, as requiring inspections at regular intervals to ensure safety, and insurance coverage against:
- Damage due to accidents
- Damage due to explosions
- Damage due to breakdown
Your maintenance policy can be combined with insurance for engineering equipments.
When applying for small business insurance, check your business contracts and agreements to see what insurance you can get for your business.
2. Small business insurance for risks and disasters
Small Business Insurance against Fire and Other Perils / Loss of Profits
You can insure your building and business contents from damage from fire. You can also insure your business against destruction from explosion, aircraft, lightning, storm, flood, or damage caused by riots or malicious behaviour. The insurance does not cover damage of loss caused by terrorism however.
If your business is damaged by fire or any other insured peril, insurance companies will take care of employee wages, maintain your business profits, and pay all extra cost of your fill-in work place.
The ‘business interruption’ policies normally cover against damage caused to your workplace or business premises. Standard business interruption insurance is suitable if your business is small and you can easily find alternate business space to work from. You can buy ‘contingent business interruption’ insurance if you wish cover for your business against epidemic, supplier or customer strikes (barring strikes by your own employees), or transport disasters. Particularly for businesses that are vulnerable, ‘contingent business interruption’ insurance is highly useful.
Public liability small business insurance is not compulsory, although highly advised. This insurance covers you for property or personal damage at work. Should a member of the public, your customers for instance, incur damage to their property or be injured themselves, public liability will help cover cost of claim.
Professional Indemnity Small Business Insurance
If the small business you run is providing professional advisory services to individuals and business, you might want professional indemnity small business insurance. Professional Indemnity covers from loss or damage of client property due to your misconduct or negligence.
Other Small Business Insurance
- Insurance against Theft – Covers damage to business premises.
- Loss of Money – Covers against theft of cash, cheques, and stamps from premises, homes, or in transit.
- Damage caused to goods in transit.
- Trade credit insurance if your customers fail to pay, especially if you are dealing in cash, or payment on delivery.
- Keyman insurance if your business is heavily dependent on few key members. You can claim cover in case of their death or severe illness.
Some small business insurances can also be obtained for:
- Coverage against employee fraud or dishonesty (fidelity insurance).
- Directors’ and officers’ liability.
- Business equipment.
- Frozen food.
- Fish-farming and agricultural operations.
- Glass breakage.
Small business insurance is solely dependent on the type of business you run and its special needs.