Securing the right insurance cover for your business is essential for stability and peace of mind; we take a look at critical cover for you.
It can be easy, particularly for small start-up businesses, to overlook the importance of securing the right insurance cover in the early stages, but it’s critical to ensure that you have protected your business, your employees – and yourself, of course.
If your organisation is just starting up, not having the appropriate insurance could spell disaster before you’ve even set sail on your quest to entrepreneurship. There is an array of insurance cover and packages and not all are legally required (or relevant for that matter); so it’s definitely worth prioritising your business’ needs.
Understanding the risks facing your business need not be as daunting as it may first appear. Once you’ve got to grips with the fundamentals of insurance policies, you can begin to integrate cover costs into your business plan. By doing this in the initial stages, it will save you any nasty surprises later on when there simply may not be the budget available. Remember: investors or lenders are much more likely to lend you money if you can demonstrate that you’re aware of the risks you could face in the future.
Give yourself ample time to secure the right insurance. Rushing the process means you’ll lack the time necessary to shop around and get the best deal at the most reasonable cost. It’s worthwhile contacting several insurance companies at the beginning of your business set-up; they can provide you with all the relevant information about the risks you could confront which may well influence your choice of property when looking to rent or purchase something for commercial purposes, for example.
The internet is an indispensable resource for hunting down the ideal insurance deal for you and your business; it gives you the opportunity to shop around before you make a concrete decision. With a multitude of price comparison sites (such as www.moneysupermarket.com that houses a comprehensive guide on start-up business insurance) at your disposal, you can never do enough research before settling on your business insurance cover. Remember: there is a large disparity between the lowest price and the best price; do not be lured in by a minimal initial outlay. The important factors to consider are the following:
- Can you increase your cover as and when your business grows or expands into new areas?
- In the event of a legal dispute involving either an employee or supplier, are all your legal costs covered?
- What payment options are on offer?
- Does the policy come with extras such advisory support?
Employers’ Liability Insurance
The employees of a business are typically the heart and soul of any organisation; after all, without them how would any work get done? This means that looking after them is not only important, but a legal requirement. Employers’ liability insurance, in layman’s terms, insures you and your employees against injury or illness acquired as a result of their work in your employment. Ensuring you have this cover will protect you against any potential claims from injured employees.
To be classified as your employee, the individual must be employed under a contract of service or apprenticeship, and it is only these people that require employees’ liability insurance. This contract can be written, spoken or implied.
As aforementioned, it is mandatory for any business, small or large, to have employers’ liability insurance. The Health and Safety Executive (HSE) can fine you up to £2500 for any day for which you are without suitable insurance, and if, for some reason, you refuse to make it available to HSE inspectors when they ask to see it you can be fined up to £1000.
The only exceptions to the rule are: the majority of public sector organisations; family businesses (if all of your employees are closely related to you, although this does not apply to family businesses which are incorporated as limited companies) and companies that only employ their owner where that employee also owns 50% or more of the issued share capital in the company. If you think you fall under any of these umbrellas, then it is worth carrying out thorough research to make sure you are definitely classed as exempt.
For more information on the Employers’ Liability (Compulsory Insurance) Act 1969, log onto the Health and Safety’s Executive’s website at www.hse.gov.uk Business Motor Vehicle Insurance.
Whether you use a single vehicle for your trade or you have a fleet of cars, business motor vehicle insurance is essential. Standard vehicle insurance policies only cover social and domestic use but if you are going to be making regular trips to see clients, for example, then a different level of cover is going to be necessary. This is due to the fact that you’re more likely to drive further and at busier times than usual, and therefore your potential risk of a claim increases.
When it comes to getting quotes for your business car insurance, as well as the usual information required for such cover (your age, model of car, claim history); you’ll need to detail the nature of your business and your estimated mileage. There are a variety of business insurance policies available depending on your individual needs, so speak to your insurer about the relevant cover for you.
Engineering inspection cover is often missed by small businesses but is required by law for any machinery that lifts or is a pressure or steam vessel (this includes lifts themselves). Without these regular inspections and risk cover, you will not be covered for damage due to accidents, explosions or breakdowns.
Once you’ve got all the critical bases covered, it’s time to consider insurance cover that’s specifically relevant to your business. Insurance firms should be able to shape packages that deal with all your needs at a reasonable price, so ask about these types of deals to ensure you get the most comprehensive cover. After all, all businesses are unique and therefore you need individual insurance to meet these individual needs. For example, an office package would typically include Employers’ Liability, Public Liability, Product Liability and some Contents Cover.
Public Liability Insurance
This particular branch of insurance is similar to employer’s liability insurance in the sense that it covers your business against injury claims, (except in this instance, for non-employees, so any member of the public or customers). Claims by the public have become a more and more common occurrence over the past few years, so ensuring that you’re fully covered in the event of such an incident is crucial. Even a small slip or trip in your shop could spell disaster for your business without the right insurance, so get individually tailored cover to make certain your business doesn’t trip up.
Professional Indemnity Insurance
If your business offers advice in any professional capacity, whether this be accountancy, IT, health and fitness or a service – think photography for example – professional indemnity insurance is a must-have. This type of insurance protects you against claims from unhappy clients that could have a detrimental effect on your business, covering the following areas:
- Intellectual property
- Loss of data/documents
If this is the case, you may be faced with a hefty compensation payout, which in the early stages of start-up could cripple your business. Professional indemnity insurance should cover your compensation costs as well as any legal spend, and thus is critical for any new business considering insurance cover.
Purchasing commercial property insurance is important to make sure that your place of work – and its contents – are covered in the event of a fire, flood or other such damage to your property. This can include anything from computers and business machinery to stock (whether this is work-in-progress or finished goods for sale).
Property insurance will also typically cover business interruption, which involves any consequences to the business following property damage, such as the possible loss of profit and increased costs to rebuild the business.
If your business is based in your home, your homeowner’s insurance policy is unlikely to cover any business-related loss, so it is imperative to extend your policies to cover business risks such as property damage. This said, homeowner’s insurance may not necessarily be able to cover all your home-based business needs, so speak to your home insurance supplier and find out which steps you need to take to ensure you’re fully covered.
Purchasing the correct insurance – and early on – is critical for any start-up business; not securing the right cover in this early stage could quite easily have a detrimental effect to your business development. In order to secure the most suitable insurance for you and your business, assess your needs and then do some thorough research, getting in touch with a variety of insurers. Doing so will take a weight off your mind in critical stages of start-up and allow you concentrate on growing your company.
Words: Jessie Bland
This article was first published in Your Business with James Caan in January 2012.