Business insurance: A simple guide

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on May 26, 2024. Next review due April 6, 2025.

    Available to all businesses and to cover almost any eventuality, comprehensive business insurance is a valuable emergency lifeline. Use it to offset risk, create a financial cushion, and avoid the potential for disaster if the worst should ever happen.  

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      What is business insurance?

      Business insurance protects organisations against losses incurred in the pursuit of their normal business activities. Losses may arise through accidents, weather-related events such as floods or lightning strike, theft, malpractice, employee compensation claims, shipping risks, utility failures, and a host of other issues. Although business insurance cannot stop problems from occurring, it can replace what was lost, pay for interim arrangements as your business gets back on its feet, and give your business the chance to thrive again.

      Do I need business insurance?

      Virtually all businesses need 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. The fact is, 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.

      Is business insurance a legal requirement?

      Only Employers Liability Insurance is required by law. Most other business insurances are optional, although some clients and organisations may require your organisation to have certain types of cover in place – such as Public Liability Insurance – before they will trade with you.

      What types of business insurance are there?

      Almost every business can purchase business insurance and there are insurance products to cover every type of risk:

      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 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 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.

      Employers’ Liability Insurance

      Under the Employers Liability Act of 1969, Employers’ Liability Insurance (ELI) is a legal requirement for most UK employers. ELI 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. ELI 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. 

      Product Liability Insurance 

      Product Liability Insurance (PLI) can protect businesses from financial loss in the event that someone is harmed, or property is damaged due to products that they supply. PLI protects against claims for:

      • Personal injuries caused by faulty product(s)
      • Loss of or damage to property caused by faulty product(s)
      • Unforeseeable circumstances such as product faults that quality control systems could not identify or foresee

      Business Buildings Insurance 

      Business Building Insurance protects the bricks and mortar fabric of the building and compensates the owner from financial loss in the event of:

      • Fire
      • Flood and burst pipes
      • Storm damage
      • Theft
      • Riot damage
      • Vandalism
      • Subsidence

      Business Contents Insurance 

      Business Contents Insurance covers the insured for the loss, damage, and theft of the property’s contents including stock and inventory.

      Top tip: If you’re a landlord, contents cover will be your tenant’s responsibility. However, depending on the lease/rent agreement you may have supplied furniture or appliances that belong to you. In which case, Landlord’s Commercial Insurance can be used to protect your provided contents from loss, damage or theft caused by the tenant or a third party.

      Accidental Damage Cover

      Accidental Damage Insurance covers any gaps in your main building insurance policy, and provides 

      additional cover to protect you from financial loss in the event that a tenant or visitor accidentally damages your commercial building or its contents. For example, a tenant overloads the electrical system, shorting out the fuse box and damaging your security equipment. 

      Tools Insurance

      Tools Insurance covers the cost of replacing business tools if they’re lost, damaged, or stolen. Tools that are typically covered include:

      • 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

      Business Interruption Insurance 

      Business Interruption Insurance protects your organisation in the event that you cannot operate your business due to unforeseen events – such as your office space is flooded, or the power goes out leaving you in the dark. Business Interruption Insurance will pay for the loss of income that results from events like these, putting you into the same position you would have been in if the incident hadn’t happened.

      Business Van Insurance 

      It’s a criminal offence to operate an uninsured vehicle on UK roads, and that includes business vans, cars and trucks. Business van insurance covers your work vans, plus their contents – personal and professional property, such as tools – and is good for all business travel, as well as the transport of finished goods and materials. Some policies may also include breakdown assistance and courtesy van hire in the event that your vehicle is suddenly off the road. 

      Top tip: Most business vans are obtained via a lease or hire purchase agreement. It is standard practice for these finance contracts to demand that the vehicle is fully insured – (not just for third-party accident plus fire and theft). Not doing so can put you in breach of your agreement, creating the possibility of vehicle repossession or punitive financial charges. 

      What are the risks of not having business insurance?

      Accidents, errors and omissions can happen any time and to any business, delivering the potential for crippling financial compensation and legal 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

      Explore your options with Swoop

      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.

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