Don’t take anything for granted with business insurance – for
instance, check that your key machinery is adequately covered


   

Business insurance

Business insurance is an obvious requirement for any business because all sorts of occurrences could threaten its very existence, or at the very least result in some unacceptable financial loss. The smaller the business the more damaging an eventual financial loss could be. Many of the covers in a business insurance policy are designed to compensate you for a serious event happening and so enable the business to continue. You need to be sure that the business is covered for these events.

Core risks

There are a core set of risks which most small and medium sized businesses should be worried about: the premises burning down; theft; breach of the law or regulations leading to prosecution; being sued by customers, other members of the public and even employees. There are also the financial consequences of anything happening which interrupts the business.

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What matters to your business

You will know what matters to your business, i.e. what happenings you most fear or could cause you serious problems. It could be computer breakdown and loss of data, damage to goods in transit, loss of tools, damage to stock, breakdown of machinery, theft of portable equipment, money being stolen, someone being injured on the premises, unexpected defects in goods which you manufactured or distributed causing injury to others, employee dishonesty, or whatever. You should know best because it is your business. But you need to think about all this in an organised way.

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Liability insurance

By law, with hardly any exceptions, all businesses with employees have to have employers’ liability insurance of £5m. Policies tend to offer cover for £10m. This is to cover you the employer for any fault by you in relation to employees’ health and safety at work. You can voluntarily augment this compulsory employers’ liability cover with broader group personal accident insurance which, regardless of fault, pays you money as the employer that you may wish to give to the employee or use yourself, e.g. to retrain or replace the injured person.

Public liability insurance is crucial to protect you from the cost of making payment for injury or death to third parties or for damaging their property.

Product liability insurance covers you for injury or damage caused by any product you supply whether as manufacturer or distributor. If you send goods to North America you should check that you are covered for this.

Professional indemnity

Professional indemnity insurance is important to protect individuals and firms where they might be liable in relation to the professional advice or service they provide. Certain occupations may immediately spring to mind, e.g. accountants and estate agents, but also any firm giving any kind of consultancy service, e.g. recruitment consultants and wedding planners, should consider themselves included.

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Legal protection

Where you have cover for employers’ liability, public liability, product liability and professional indemnity you will automatically have legal protection included to defend yourself in these situations. However, you should think carefully about having legal protection to help you defend yourself in other situations, e.g. employment disputes, Data Protection Act problems, arguments with HMRC, commercial disputes.

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Look at the details of cover

In terms of thinking about all the possible risks it is very important to look carefully at all the policy details, particularly as they may trigger further thoughts. If you are buying direct from the insurer or buying online from another source, the onus will be very much on you to be happy that you are adequately covered. If you talk to a broker you will be getting advice – but even here you should have a good idea of your requirements beforehand.

Check exactly what is included

What may be standard in some policies may only be available as an optional extra in others. Be happy with the levels of cover. You may think, for instance, that the cover for future income if your business is interrupted is not high enough. However, you can always ask for it to be raised or find another insurer automatically offering the required level. The same goes, by way of example, for cover for computer breakdown or loss of data. Also check that machinery which is key to the operation of your business is covered.

Making your life easier

Running a business is hard work so have a look to see if the policy is trying to make your life easier – e.g. it automatically increases your stock cover in the weeks before Christmas and Easter; it index-links the cover on buildings and contents; it offers a replacement glazing service and a property repair helpline; it provides a business advice service.

Being aware of exclusions and special conditions

There are a lot of exclusions with business insurance and you should be happy that you can live with them or, alternatively, get an extension of cover from the insurer or find another insurer. All risks cover may be offered but with exclusions, or there may be cover only for specified occurrences – either way be satisfied that risks important to you are covered.

You can never take anything as being automatically covered. For instance, legal protection may only be related to statutory liability; employee fraud may be excluded. Unless there is forcible and violent entry, theft may not be covered – not good news if a visitor casually walks in and steals an employee’s belongings or an item of equipment. It may make sense to insure your employees for injury during a robbery, but make sure you are comfortable with any clause which excludes remedy if there is employee collusion.

Some other examples

Make sure you are aware of whether accidental damage to glass is covered and that you are happy with any security requirements. Be clear about what is meant by cover if your business is interrupted by events happening to your suppliers or customers.You may wish to be certain that there is cover for your computer records and business books when away from your premises, or that there is cover for damage by water from the sprinkler system.

You may wish to have cover for your property and stock when you have a stand at an exhibition; and check beforehand that you have the level of public liability cover likely to be required by the exhibition company. Check what exactly is covered by fidelity (employee dishonesty) cover and whether you are happy with any duties on you.

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Types of businesses catered for

Insurers will usually have small businesses and the self-employed in mind. They will usually be thinking of medium sized businesses too. How you fit into their thinking will depend on the minimum level of turnover they will accept, e.g. £750,000 or £2 million.

Most insurers offer combined or package policies. Alternatively, there will be the facility to choose the covers you want, putting them together yourself. You will be helped by the fact that there will be policies out there specifically geared to your kind of business.

Wide range of policies

Indeed, there is a very wide range of policies available aimed at specific businesses, trades and professions. Here are some examples just to give you an idea of some of the specific kinds of business categories covered: offices/surgeries, shops, restaurants/pubs, guest houses/hotels, care homes.

Then there are manufacturers, distributors, builders, plasterers, plumbers, electricians, window cleaners, hairdressers, accountants, estate agents - people who work from home, people who offer advice. You name it – what your business does or what you personally do can be accommodated somehow in an insurance policy, whether that policy is more general with specific covers added or specifically targeted right from the start.

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Sensibly cutting costs

In today’s difficult economic times you should be thinking of sensible ways of keeping premium costs down. But don’t cut corners for the sake of a few pounds. Instead always check if you can get the same covers elsewhere for a cost you are comfortable with. However, in terms of reducing the premium being initially asked there are ways of keeping to an insurer you like.

For example, you could go for a higher excess (the level at which you have to pay the first amount of the claim); you could cut out covers in certain parts of a package which you don’t need or which overlap – you can also cut out covers which overlap or duplicate when you have a number of individual policies. You can ask to reduce the levels of cover if that makes sense for your situation. Check on the no claims discount and how exactly that works.

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Payment by instalments

Always ask for the facility to pay premiums by instalments at no extra cost, particularly if the premiums are significant. When it comes to renewing the policy with an insurer you would prefer to stay with, there is no harm in asking them to keep down or reduce the premium for the same covers otherwise you will go elsewhere.

If you make or assemble anything to sell to anyone you will need product liability insurance

It doesn’t matter what kind of business you operate you will still need legal protection cover

Business insurance involves insuring your core risks because you could, literally, be left with nothing

While you may think your business is special, a combined or package insurance policy may do the job for you very well

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