Starting
up in business
Insuring
Your Business
When
starting a new business, you will no doubt recognise the need
for insurance. It can provide compensation and peace of mind
should things go wrong but can also represent a significant
cost.
In this factsheet we consider the different types of insurance
you need to consider.
Compulsory
Insurance
Employers’
liability insurance is compulsory to cover your employees.
By law you must have at least £5 million of cover although
a minimum of £10 million is now provided by most policies.
You must display the certificate of insurance in the workplace.
Motor vehicles liability insurance is also compulsory
and must cover at least third party, fire and theft.
Optional
Insurance
Other
categories of insurance are optional and a decision as to
whether or not you need cover under any given heading will
depend on the nature of your business and an assessment of
the risks.
Public liability
Although strictly this is not compulsory you will almost certainly
feel that you need cover under this heading. It covers claims
for damages to third parties.
Property
You can think about limiting cover to specific risks such
as fire and flood or providing more general cover. Consider
the level of cover you would need for the premises (if you
own the building), equipment and stock. If you rent your premises
then you should check that the landlord has the appropriate
cover.
Theft
If your business does not involve expensive items of equipment
then you might to decide to pass on this one at least initially.
If you do decide to provide cover for theft then an insurer
will require a reasonable minimum level of security.
Professional indemnity
This is only likely to be necessary if you give advice which
could make you liable. It protects against any loss suffered
by your customers as a result of negligent advice. In some
professions it is compulsory – examples being the law,
accountancy and financial services. However it is common in
other sectors such as computer consultancy and publishing.
Business interruption
This covers compensation for lost profits and extra costs
if your business is disrupted due to say a fire. It is also
referred to as ‘consequential loss’ insurance.
Key man
A small business is often dependent on key members of staff.
What would happen if they became seriously ill or died? Do
you need to consider insurance cover to pay out in such a
situation?
Specialised insurance
A whole host of different policies cover a range of specialist
situations – for example engineering insurance and computer
policies.
Working
from Home
If
you are planning to start your new business from home then
don’t assume that your normal household insurance will
be enough. It will not usually cover business risks. It is
possible to obtain special ‘working from home’ policies.
Shopping
Around
It
may be stating the obvious but it is important to shop around
to get the best deal. You should obtain several quotes and
always be wary of cheap deals. A personal recommendation may
be the best way to decide.
Level
of Cover
Again
it may be stating the obvious but too much cover and your
cash flow will suffer, too little and the consequences can
be catastrophic.
Consider the level of cover you need. With buildings and equipment
make sure you are covered for the full replacement cost.
If there is to be an excess on any policy make sure that it
is set at a sensible level.
How
We Can Help
Please
talk to us if you would like any further help on insuring
your business.
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of page
For information of users: This material is published
for the information of clients. It provides only an overview
of the regulations in force at the date of publication, and
no action should be taken without consulting the detailed
legislation or seeking professional advice. Therefore no responsibility
for loss occasioned by any person acting or refraining from
action as a result of the material can be accepted by the
authors or the firm.
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