Small business insurance

What is small business insurance?

Small business insurance is cover designed for the needs of a small business.

The exact details of the policy will vary from one business to another and depend on factors like whether you have an office space and whether you employ staff.

However, insurance for small businesses usually includes things like public liability, professional indemnity and business contents insurance.

Why do I need small business insurance?

Small businesses don’t usually have extra cash to spare, so damage to your premises, stock or tools can cripple your ability to trade. Beyond that, liability claims can run to millions of pounds, which can jeopardise the whole business.

Having small business insurance cover can protect your business against financial hits and potentially save your business from closure.

What type of insurance cover should a small business have?

This will depend on the nature and needs of your business. For example, whether you employ staff, have your own premises, sell products or give professional advice.

Cover will also vary by insurer, but insurance for small businesses usually includes:

• Business buildings insurance. Business buildings cover protects the fabric of your premises if it’s damaged or destroyed by a covered event. Depending on the policy, this could include burglaries, vandalism or natural disasters. Note that if your premises are rented rather than owned, your landlord may already have this cover in place, so check with them before you purchase a policy.
• Business contents insurance. Business contents cover protects the contents of your business. It’s important to note that this usually includes things like furniture and office equipment, and not any items that are classed as stock (separate cover is available for those).
• Stock cover. As mentioned above, your stock is usually not covered under your business contents insurance, and so you will need this type of cover to protect it from damage or theft. Some insurers might require you to keep your stock stored in a certain way, to reduce its risk of being damaged or stolen, in order to qualify for cover.
• Public liability. Public liability insurance covers the cost of legal fees and compensation if a member of the public is injured or their property is damaged on your premises. These types of settlements can reach millions of pounds, so having this cover in place is extremely important to any business that frequently interacts with the general public.
• Product liability. If a product you use on customers or sell through your business causes illness or injury to a member of the public, a product liability policy can cover you for legal fees and compensation owed. Note that you don’t need to have manufactured the product to be considered liable for compensation.
• Employers’ liability. Having employers’ liability cover is a legal requirement if you employ staff. It’ll cover you if one of your employees gets ill or is injured as a result of the work they do for you. Depending on the policy specifications, this can include injuries sustained outside of your premises, as long as the employee was doing work relating to your business at the time.
• Professional indemnity. A professional indemnity policy covers you if you provide expert advice or produce work based on your expertise as part of your business, and a client claims that you were negligent or provided inadequate results.
• Tools and equipment cover. If you use pricey equipment and tools as part of your business, you’d want to protect those against damage, loss and theft. This cover helps repair and replace your items, meaning you can get back to trading as soon as possible. Some policies might also include cover for items in transit, which is particularly important if you offer mobile services.
• Business interruption. Business interruption cover can help protect you against loss of income if the running of your business is disrupted. Covered events will vary by provider, but can include an injury, illness or natural disaster. This policy can also help cover any rent that you are obliged to pay while your business is closed.

Other types of cover you might wish to take out include:

• Van cover. If you carry around a lot of equipment or do deliveries, you might choose to transport everything in a van. If this is the case, van insurance is for you. This type of policy often includes cover for tools and equipment, as well as other benefits found in regular car insurance. It’s important to note that most car insurance policies don’t include business use, so it’s worth checking the details of your policy if you use your car for your work.
• Legal expenses. While liability compensation payouts can run to millions, other costs involved in a court case can also be a serious burden. Legal expenses cover can help make the whole experience less stressful.
• Personal accident. No one is immune to accidents and injuries. Personal accident cover helps out with lost income, medical costs and hospitalisation benefit in case of serious injury or even death.

How much will business insurance cost for a small business?

The cost of your small business insurance cover will vary depending on a number of personal factors, like the size, location and nature of your business.

Cover from our partner Superscript starts from £5.13 per month for the Essential policy, and £7.58 per month for the Professional policy. Management cover, which protects your management and shareholders against the operational risks associated with running a company, starts at £6.90 per month.

Elements that can affect the cost of your insurance include:

• The size of your business
• The nature of your business and how much of a risk it poses to you and others
• The level of cover you take out
• The number of employees you have

Where can I get insurance for my small business?

Many insurance companies offer business insurance policies for a range of business sizes and types.

Shop around and compare policies to find the best deal for you, but remember that some insurers aren’t on comparison sites, so don’t rely on those.

One great option to check out is our partner Superscript. It offers two levels of insurance for small businesses, plus management cover to protect the interests of your management and shareholders.

Can I cover loss of income?

Finder’s insurance expert Ronny Lavie answers

Most policies do offer cover for loss of income. This can be in the shape of business protection cover, personal accident cover, or both.

Each of these options covers you for different circumstances – personal accident pays out in case an injury means you cannot work; whereas business protection can also cover you for illness and injury, as well as things that affect your premises, like natural disasters or police activity.

If loss of income is a policy element that is important to you, make sure to read through your policy details carefully to check that it’s included in your cover. Some insurers will let you tick it as a crucial benefit when you take out a quote. Generally speaking, knowing exactly what is and isn’t included in your cover is always recommended, to avoid expensive surprises.

What cover limits do I need?

Like many other elements of small business insurance cover, this will depend on the specific requirements of your business.

Things to consider when deciding how much cover to take out include:

• How many employees do you have?
• Do you deal with members of the public?
• Do you own or lease vehicles (including vans)?
• Do you work in public spaces?
• Do you have dedicated business premises? Do you own or rent these?
• Do you give professional or financial advice?
• Do you use products on customers or sell them to the public?
• How risky is your work to yourself, your employees and the general public?
• Do you work on high profile, large scale projects?
• Do you own equipment or tools? How expensive or specialist are they?

How can I keep the costs down for my small business insurance?

The important thing is to shop around and compare insurance quotes for your small business. You can use the information you find to secure a great deal with your preferred insurer, and even haggle down the price, as many insurance companies will want to beat their competitors.

Raising your voluntary excess can also lower your premium, but make sure you pick a figure you can actually afford to pay should you need to make a claim.

If you can afford to pay for your cover in full up front, this can help you avoid interest rates some insurers charge for monthly instalments.

Making a claim can also push up the price of your insurance so making sure you take all recommended safety measures to keep your staff, your customers, your premises, your stock and yourself safe can help keep costs down. This won’t prevent all potential claims but is good practice either way.

Frequently asked questions

• Do I legally have to insure my business?

  With the exception of employers’ liability insurance, which is a legal requirement to anyone who employs staff, getting small business insurance is not legally required.

  However, getting some type of cover is highly recommended, as a big financial hit can cripple a small business. This is particularly true of public and product liability and professional indemnity claims, that can reach millions of pounds in some cases.

• Do I still need business insurance if I work from home?

  This depends on the nature of your business, but in most cases, some kind of cover is recommended.

  If you do clerical work from your home, meaning simple office work that does not require seeing clients, you might be covered by your regular home insurance cover.

  If you see clients or receive visitors in your home as part of your business, you are unlikely to be covered for this. Taking out insurance for small businesses on top of your standard home insurance can cover your business activity.

  Have a look at our working from home insurance guide to learn everything you need to know.

• Does it cost to make a claim?

  Yes. In most cases, you will need to pay an excess to your insurer. The amounts change depending on the provider and the type of claim, but should all be detailed in your policy documents.