Do I need business insurance?

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on November 10, 2023. Next review due April 6, 2024.

    All organisations, including sole traders and the self-employed, need business insurance, because risk is everywhere and problems usually arrive without warning, giving you no time to prepare. Businesses that have contact with the general public, work for local councils or central Government, or operate in high risk-industries are especially vulnerable to major financial compensation claims if things should go wrong. Put simply, the potential costs and problems that may come from not having insurance protection can far outweigh any savings you may make by not buying cover.

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      Is business insurance a legal requirement?

      No. Only employers’ liability insurance is legally required. Other business insurances are optional, although some clients and organisations may require you to have certain types of cover in place – such as public liability insurance – before they will trade with you.

      Employers’ Liability Insurance 

      Employers’ Liability (EL) Insurance is a legal requirement for most UK employers. EL protects you and your employees, (including those who no longer work for you), should they be injured or become unwell as a result of working for your business. EL typically covers the associated legal and compensation costs, and other damages of such events, but it can also cover accidental injury or damages caused by an employee to a third party, like your customers.

      Other business insurance you may need

      As well as employer’s liability coverage, most businesses will protect themselves by buying a range of insurance:

      Public liability insurance

      Public liability insurance protects your business if someone is injured, or their property is damaged because of the services that you or your business provides. This type of cover, also known as PL or liability insurance, is designed to protect your business against third party claims for injuries or property damage from a customer or client, passer-by, or a visitor to your business premises – whether you’re at fault or not.

      Professional indemnity insurance

      Professional indemnity insurance, also known as professional liability insurance, is an essential type of cover for individuals and businesses that advise clients, help them navigate complex financial or legal affairs, or provide them with vital information that is published in the media. In these kind of cases, errors can cost thousands or even millions in legal compensation claims. Professional indemnity (PI) can protect you if a client makes a financial loss because of your work and then makes claim against you or your business. Trade associations, government bodies, public institutions, and major customers will often require proof of a minimum level of PI insurance before doing business with you.

      Portable equipment insurance

      Portable equipment insurance, also known as tools Insurance or business equipment insurance, covers the cost of replacing business tools and equipment if they’re lost, damaged, or stolen. Items that are typically covered include:

      • Office equipment and contents (chairs, desk, copiers, computers, mobile phones)
      • Handheld tools (hammers, screwdrivers, saws, pliers)
      • Power tools (drills, sanders, angle grinders, nail guns)
      • Plant equipment (excavators, rollers, diggers, dump trucks)
      • Owned, loaned, leased or hire-purchased/leased tools

      Cyber insurance

      Cyber insurance protects businesses from financial loss created by data breaches and cyber-attacks. It covers legal claims, compensation costs, and fines under the GDPR (where legally insurable). In some cases, it can also provide a fast response plan including legal, IT, PR and customer service support.

      What does business insurance cover?

      There are many types of business insurance, and they can cover almost any type of risk, covering your business from loss caused by accidents, errors, omissions, theft, loss, fire, flood and more. Typical cover includes protection from:

      • Employee claims for injury or sickness caused by working for your business
      • General public, client, and supplier claims for injury or sickness caused by the products or services you provide
      • Loss of equipment, tools, plant and machinery
      • Vehicle loss
      • Claims from providing incorrect information and advice
      • Defamation and libel claims
      • Cyber attack
      • Business interruption through events beyond your control
      • Loss of personal property through providing a personal guarantee for debt
      • Supply chain breakdown

      How much business insurance cover do I need?

      The amount of business insurance you need depends on the type and size of your business, plus, if you employ others, you will need a minimum of £5 million employers liability insurance. To calculate the levels of cover and what type of policy you need, start with the basics. For example what would it cost you to replace your…

      • Buildings
      • Plant, equipment and machinery
      • Vehicles
      • Fixtures and fittings
      • Inventory
      • Technology and proprietary IP 
      • Cash on premises and business records

      Then you should think about the type of work your business does, the size of your sales and contracts, and the potential claims you could face from clients, consumers, and suppliers if anything were to go wrong. You should also check with your professional body or industry regulator, as they may set a minimum level of insurance you must carry. 

      Lastly, you must also consider what it would cost you to keep operating in the event of a crisis. For example, if your premises were destroyed in a fire, how much would it cost to secure temporary accommodation and how much would it cost to get back up to speed? Could you afford to pay your employees in the interim? Could you afford to pay yourself? 

      Remember, all insurance seems like a secondary cost until you need it. Then it’s suddenly essential.

      What happens if I don't have business insurance?

      Never mind the fines by not having employer’s liability insurance, accidents, errors and omissions can happen any time and to any business, delivering the potential for crippling financial compensation costs that could close your operation down. In short, running a business without the correct insurance protection in place is like walking a tightrope without a safety net. Things may go fine – until they don’t, and then the impact can be enormous.

      Potential risks from not having business insurance include:

      • Significant financial compensation claims
      • Closure of your business
      • Personal claims against the business owners and directors
      • Loss of personal assets used to guarantee business loans – including your home
      • No longer able to register as a company director or significant beneficiary
      • Expulsion from your trade guild or industry body

      How Swoop can help

      All business involves risk, but that doesn’t mean you have to suffer the consequences if things go wrong. Don’t gamble with your organisation’s future. Contact Swoop today to compare top-quality business cover from different providers and to discuss all your insurance needs. 

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

      To read our editorial policy, please click here.

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