What is business insurance?

Business insurance protects you financially in case something goes wrong with your business. It can help cover the cost of damage to your property, employee-related issues, compensation claims and legal fees. It can be invaluable in the event of an unforeseen event, such as a flood, fire, or if you were to be sued by someone.

You can get general business insurance or more specific, tailored policies for your business category. You can also tailor your level of cover to protect your livelihood, whether you’re a one-person-band or you have a team of employees.

What does business insurance cover?

The sky’s the limit when it comes to insurable events or items for business insurance. You can specify exactly what you’d like to cover when you buy your premium, but here are some common things business insurance can cover:

  • Damage to or theft of your business’ property and equipment
  • Injury or property damage caused by your business
  • Sickness or injury to your staff at work
  • Damages costs for third parties caused by your business
  • Business interruption for earnings lost due to an insured event (eg. flood)

Employers’ liability is a legal requirement for any business with employees (who aren’t members of the business owner’s direct family). It ensures that, in the event of illness or injury, staff can be compensated via the insurance policy. For every day you employ people without this insurance, you can be fined £2,500. It doesn’t apply to working with sub-contractors, though, it’s only if you are their employer.

Professional indemnity and public liability aren’t a legal requirement, but they are a good business decision. Some clients will only work with you if you have proper insurance, especially public liability. Often, regulators and professional bodies will also require adequate insurance before you can become a member or licensed.

If you are a member of a public body or regulator, they’ll be able to advise on whether business insurance is necessary for you.

What types of business insurance are there?

There are three main types of business insurance available. They can all work together or individually, allowing you to specify what you need, and leaving out what you don’t:

Check Mark Public Liability

Offers financial protection in the event your business injures a member of the public or damages their property. This includes your clients and their property, which means some customers or clients might insist on public liability before they’ll work with you.

Public liability insurance also covers injury and damage accidentally caused by one of your employees, but only if you have employers’ liability insurance.

Check Mark Employer’s Liability

This one is a legal requirement if you employ one or more members of staff outside of your immediate family. It can help financially with the cost of compensation claims if your employees get ill or injured in the workplace.

You’ll need to get employers’ liability insurance even if your members of staff are temporary or contractors. Without this insurance, you can be fined £2,500 every day you’re not insured. You must make sure you’re covered for at least £5 million.

Check Mark Professional Indemnity

Covers you against financial loss if your client takes legal action against you if your advice loses them money, or your work causes a problem. If you need to compensate a client for financial or reputational loss because of work that you did for them, professional indemnity can cover the costs for you.

How to find cheap business insurance

The great thing about business insurance today is that you can totally tailor the policy to meet your needs. There’s no one size fits all, so you needn’t pay for elements of cover that you know you’ll never need.

Here are a few ways to help reduce the cost of your business insurance premium:

1

Reduce your level of cover

The higher the sum you need to insure, the more your policy premium will be. So it’s well worth doing the maths to work out how much you’ll need cover for, rather than just going for a standard level.

2

Increase your policy excess

As with most insurance, you can specify how much you’d be willing to pay in the event of making a claim. This is called your excess – there’s generally a compulsory and a voluntary excess. The lower your excess, the pricier the premium, so if you could afford to pay more in the event of a claim, the cost of your premium will come down. It’s important to make sure your excess is affordable for you, though, as if you can’t pay the excess, your insurer won’t hold up their end of the claim either.

3

Lower your liability risk

Insurance is all about risk, so taking action now to lower your risk profile can really help to reduce the cost of your insurance premium:

– Install CCTV and alarms on your business premises
– Implement risk assessment protocol
– Give health and safety training to employees
– Do quality control procedures
– Complete professional accreditations

4

Compare quotes & never auto-renew

Whether you’re buying business insurance for the first time, or your premium is up for renewal, don’t settle for the first price you get offered. Always compare online or over the phone to get the best price. Our online business insurance comparison tool makes it easy to find a great price, or if you’re feeling stuck, give us a call. We’d be delighted to help.

What other insurance does a business need?

There are lots of specific business insurance elements that you can add on to your policy, including:

  • Product liability insurance: If a customer or client is injured, or their property damaged by a product you sold them, product liability insurance will protect you financially. This is often an add-on to public liability insurance.
  • Commercial buildings and contents insurance: This protects your premises and contents if they get damaged in an insurable event, usually: flood, theft or fire. Note, it doesn’t typically cover large quantities of stock or tools – those may need to be covered by additional policies.
  • Landlord insurance: If your rental property is damaged, this insurance will cover the cost of repairs. You can also include protection against loss of earnings due to an insured event, for example burst pipes that mean you can’t rent out your property while the repairs are made.
  • Key person cover: Is there someone who’s essential to the running of your business? You can get insurance to cover the impact of them dying or being diagnosed with a critical illness.
  • Cyber-risk insurance: Protects your business in case your data is breached or you’re targeted by a cyber attack. A modern, but increasingly necessary add-on to business insurance.

What level of insurance does my business need?

The level of insurance, or how much you’re covered for, depends on the size and nature of your business. You might be a sole trader working from home, however, you might give financial advice that could result in big losses. It’s important to ensure you’re covered for everyday risks, such as breakages, and larger risk events, such as being sued.

Some professional bodies or regulators might set out a minimum level of cover that they expect you to have. For businesses that need employers’ liability, the minimum amount of cover you must have is £5 million. 

Is business insurance worth it?

We believe business insurance is absolutely worth it. Like all insurance products, you don’t need business insurance until you do. Simply, none of us know what’s around the corner.

It’s tempting to think bad things won’t happen, but it’s worth considering if you could afford to cover the cost of being sued, of rebuilding your premises, or even of replacing all your tools.

Having business insurance gives you the peace of mind that if the day comes when the worst happens, you’ll be covered. It also gives your business credibility, showing your clients and customers that you’re a professional, safe pair of hands. Having the right insurance shows your clients that if an accident were to happen, they can trust you to put it right.

Searching for something specific? Compare business insurance quotes for your business sector:

Compare business insurance quotes

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Business insurance FAQs

Do I need business insurance if I’m self-employed?

If your business is a one-person enterprise, then it’s not a legal requirement. Only business owners who have employees legally need insurance (employer’s liability).

That said, business insurance is a really good idea for anyone running their own business. If you give advice, provide a service, or handle client data, you could be sued for negligence or for a simple mistake. If you work on clients’ properties or premises, you might accidentally break or damage something, or hurt someone, which you’d be liable for.

Plus, as you’re self-employed, you can put your business insurance on your tax return as an expense.

Do I need business insurance for an online business?

Having business insurance is not a legal requirement for online businesses, unless you employ one or more members of staff. If you have employees, you must purchase employer’s liability insurance.

That said, we’d always recommend purchasing business insurance. Whether you’re offering a digital service, online advice, or you have physical stock, it’s worth protecting your livelihood with an insurance policy.

Does my business need to be VAT-registered to get insurance?

No, you can buy business insurance whether you’re a sole trader or a VAT-registered business. You can also purchase the premium before you start trading. It can be helpful to have insurance in place when securing new clients and enrolling with professional bodies.

What details will I need to get a business insurance quote?

Getting a business insurance quote couldn’t be easier with Quote Goat. You can do it online or over the phone, whichever you’d prefer. We’ll just need a few details:

  • What type of business you own: sole trader, limited company or partnership
  • How long you’ve been trading
  • Whether you have any employees, and if yes, how many
  • Your expected turnover for the next year
  • What environments you work in (eg. are they high risk)
  • Details of your business premises
  • Your claims history

Can I get cover for multiple trades in one policy?

Yes, you can. Whether you’re a builder who also does roofing jobs, a developer who dabbles in copywriting, or a chef who offers gardening on the side, you can tailor exactly the cover you need, even if they’re totally different trades.

Can I pay for business insurance by Direct Debit?

Of course. You can choose whether you pay for your premium in one annual lump sum, or on a monthly basis, as suits your business’ cash flow.

Do I need to get business car insurance too?

Do you use your car or van to drive between home and client properties, between client properties, or for any other journey in relation to your business that isn’t a commute (ie. driving from home to a fixed workplace, and back)? It’s likely you’ll need business car insurance, however, this can usually be added onto your standard car insurance policy without costing too much more. In most cases, you just need to call up your insurance provider and amend your policy, or select that you use your vehicle for social, domestic & pleasure (SD&P), as well as Business use when getting a new policy quote.

 

If you have a vehicle that’s primarily used for business, ie. a builder’s van, or a taxi, you’ll need to get commercial vehicle insurance.

What happens if I don’t get insurance?

In the worst case scenario, if you don’t get business insurance and someone makes a claim against you, you will be liable to the injured party for all compensation, as well as legal fees.

These costs can quickly run into the hundreds of thousands or even millions. Without business insurance to cover the costs, you, the business owner, would be liable. This can lead to the business to cease trading, and can even put the business owner into bankruptcy. It’s a nasty business, and well worth avoiding with a simple business insurance policy!

Author Image - Michael Foote

Written By Michael Foote, Insurance and Finance Expert

Michael Foote is the founder of Quote Goat and has over 13 years experience working in the finance, insurance and currency sectors. Since launching Quote Goat he has appeared on TV as well as many of the largest online publications including Forbes, The Telegraph and The Metro. Prior to Quote Goat, he worked in finance in the city for a number of firms including HSBC.