The essential insurance cover for small businesses

With 99% businesses in the UK considered as being small and having fewer than 250 employees, it is important to have the right insurance cover in place.

Whether you operate in retail, food or hospitality, you need to think about what accidents could occur and how you could be liable for damages.

The impact of a lawsuit can be hugely expensive and damagin to your business and its reputation – so having the right cover is vital.

Businesses that come into contact with members of the public and offer a service or product tend to be at a higher risk of making a claim. Here we review some on the most important types of insurance used to cover your small business.

Public liability

Public liability refers to how your business may interfere with those around you including customers, passersby, local neighbours, the environment and even trespassers. Hence, it is relevant for shops, schools, surgeries, clinics, practices and anywhere you will find people passing through regularly.

Although we always try our best to protect customers, we never know when an accident will occur. The benefit of having public liability in place means that your insurer can contribute towards any compensation, medical fees and legal costs incurred and paid to the victim in the event of an accident.

When might I need it?

The most common example is if someone slips on the wet floor of your shop and sprains their ankle. As a business owner, you have a legal obligation to protect anyone that interacts with your business and therefore has the right to demand compensation.

Other examples where public liability insurance might be used include a handy man working on someone’s premises and breaking something valuable whilst doing their job. They will be required to replace any damaged items and this is something that they can claim for.

How much do I need?

Cover is available for up to £10m per year or more, depending on the nature of your business. A small shop or clinic will not be at a huge risk so a small policy will be sufficient. A larger clinic like Centros Unico with over 12 stores will likely require a policy that exceeds £10 million.

Professional indemnity

Professional Indemnity (PI) cover surrounding those giving professional advice. This includes lawyers, doctors, financial advisers, accountants, marketers and consultants.

When might I need it?

It is assumed that the advice received by the customer will have a big impact on their business, health or financial position. If the client feels that the professional has acted negligently or offered bias or poor advice, they may wish to seek financial compensation and take legal action.

For instance, if an individual believes that their financial advisor has provided bad advice and this has caused a huge financial loss, they may be able to prove negligence and receive a reimbursement of fees or claim damages.

This can also extend to anyone providing a service, such as a massage, haircut, caterer or builder.

How much do I need?

Those using PI cover can apply for up to £10m worth of cover per year and bespoke policies are available for those companies with high risk and turnovers.

Products liability

Products liability relates to the manufacturing or administering of products and their potential damages to the general public.

When might I need it?

There is always the risk that something that you create can be defective or below standard and this presents a danger to the customer. This includes electrical equipment, toys and even food products.

An example can be a child’s toy that was manufactured and a defective model makes it very sharp and potentially harmful. Another case may be finding a hair or inedible product inside a sealed food container.

How much do I need?

Products liability ranges from £1m to £5m for small businesses, and can be extended depending based the size of the company.

Employer’s liability

For anyone that hires employees, you have a legal obligation to protect any staff that you employ from any potential injuries or dangers associated with their work. You have a duty of care to your staff and must be responsible for any damages they face carrying out their work.

When might I need it?

Common examples including falling off a ladder at work or injury caused by heavy lifting. In the event that an employee has suffered injury or damages, they can claim from their employer for sick pay, medical compensation and damages.

You do not require employer’s liability if you hire your own family members and you do not require it for yourself as a sole trader or freelancer.

How much do I need?

Up to £10m worth of cover is available for SMEs and to emphasize its importance, firms can be charged a daily fine of £2,500 for not having a policy or showing documentation upon request.

Contents insurance

Contents are the physical items and machinery you require to carry out your business. This includes computers, stock, inventory and machines.

When might I need it?

If any of your contents are stolen, vandalized or broken due to fire, flood or other peril, you can claim from your insurer to have these replaced immediately and limit your business interruption.

How much do I need?

The amount of cover available runs in the millions of pounds depending on the value of your contents. It is important to have a record of all machines items on your policy so that you can claim for them effectively in the event of an accident.