Business Insurance

In the UK there are many different types of Business Insurance. It’s because of this diversity that the options available can sometimes be confusing. So for a new business that has no staff or an existing enterprise with teams of employees it’s important to decide what level of insurance you must have and those that are advisable.

Here is a list of 16 different types of Business Insurance you might consider.

Employers’ Liability Insurance – The Employers’ Liability (Compulsory Insurance) Act 1969 requires that employees be covered against injuries whilst doing their job – Mandatory.

Motor vehicle insurance – Most business policies are comprehensive or third party, fire and theft. Legally you must, at least, insure your legal liability for injury to others and damage to their property – Mandatory. If you use private vehicles for business use, make sure the relevant policy accounts for this.

Professional indemnity insurance – Protects businesses against injury, loss, or damage, arising from their professional negligence or that of their employees. Depending on your industry certain profession MUST have insurance, these include; architects, accountants, solicitors, surveyors, insurance brokers and financial advisers.

All of the following types of Business Insurance are recommended.

Business travel insurance – Some employees travel extensively around the world. Cover against delays, loss of life and injury; equipment and money is recommended.

Fidelity guarantees – If you are worried about dishonest employees Fidelity Insurance covers against loss of cash or stock.

Key Man insurance – Some businesses would cease to function properly without certain individuals. It’s not uncommon to insure Directors and senior managers against the loss of income from death.

Premises insurance – Much like home insurance your business premises should be insured for the complete rebuilding cost.

There are two types standard and “all risks”. Talk to your broker about what level of cover you might need.

Contents cover – If you business holds any type of stock you might consider business contents insurance.

Plant and business equipment – Much like contents insurance, you can insure your machinery or business equipment.

Goods in transit cover – This is a popular insurance if you are looking to dispatch high net worth items. The post office always asks the value of your item being sent. Goods in transit cover operates in the same way.

Engineering insurance – Engineering insurance covers against electrical or mechanical breakdown.

Business interruption insurance – The riots in London in 2011 resulted in claims for disruptions to your business. Claims for loss of income and expenses would be likely.

Public liability insurance – This is a very common policy that covers your business from damages to members of the public, either for death, injury or property damage.

Product liability insurance – If you sell a product you need to consider carefully whether that product may harm an individual due to defects or negligence in manufacture. If so, you need to talk through the risk with your legal adviser.

Pollution risk insurance – Pollution is taken very seriously by the Environment Agency. If your business is caught polluting the environment you could be liable and fined and forced to pay to clean it up.

Directors and officers insurance – Company directors and officers have specific duties and responsibilities, for which they can be held responsible. Directors and officers insurance provides cover for compensation and legal costs, if they are found to have inadvertently acted outside their terms of reference.

There are differences in the legislation depending on which part of the country you live in. If you live in Scotland or Northern Ireland you should check local laws.

Every business, whether small, medium or large, is exposed to risks. You can rule out these risks by purchasing business insurance which covers for the loss of revenue. You should, however, choose the right insurance which is suitable for your business. This article discusses mistakes that you should avoid, while purchasing business insurance.

Right insurance protects your finances:

Irrespective of the size and type, every business has the possibility of facing risks; they can either be man-made or natural. Natural risks include floods, heavy rains, violent winds (storm, gales, hurricanes and the like), lightning and the manmade risks include vandalism, theft, accidents at workplace resulting in casualty, loss of business data, inadvertent leakage of data and so on.

To choose the most suitable insurance for your business, taking into account the nature of your business is very important. While purchasing business insurance, you need to consider things like products/services you offer, the customer base, availability of raw materials, whether the product needs new design/method, or any other issue that may potentially be a risk factor for your business.

Purchasing business insurance is a sensible decision in favour of your business. It is also important that you should avoid the following mistakes while purchasing the insurance.

Underestimating the importance of business insurance:

Every business has its own risks. You should not underestimate the risks your business may face. However small the risk is, you should purchase the right type of insurance for your business. Purchase the insurance even if your company finances are good enough to withstand the risk.

Getting attracted to low priced policies:

Don’t mistake low priced policies for cost effective policies. The low premium might be because the risk it covers is low. If this is the case, it might be troublesome to you in the event the expenses of compensation exceed your policy cover. You need to take an insurance cover that is, sufficiently more than the probable claim for compensation.

Avoid purchasing a smaller cover for your business. In case of higher deductibles, you will have to spend a huge amount from your pocket. A deductible is an amount that the policy holder has to pay before getting compensation from the insurer. The deductibles are small and lead to lower premiums.

As a thumb rule, check out for all the aspects such as, the cover for building (where your business is located), Employers Liability Insurance, as per rules of government from time to time, regardless of your size, type, hazardous nature, location of your business.

Under or over insuring:

Avoid under insurance, it may lead to considerable loss to your business. This is because under-insurance cannot cover all the expenses that you have to bear in the event of claim. Purchase an insurance cover that is adequate for your business.

Over insurance will also not help you. It leads to more expenses. At times you might be tempted to buy business insurance that seems less expensive. But, in reality the insurance cover that is less expensive may not cover the type of risk that your business may face.

Buying insurance from brokers/agents with no/less knowledge:

Purchasing insurance is not an easy task. It requires great deal of research. Choose brokers/agents who specialise in business insurance. Ensure you choose the ones that have good track-record in claims settlement and servicing the users.

Consider purchasing insurance from brokers. Look out for an insurance broker with great experience and repute, and who can provide you the best service at optimal costs. You should avoid brokers/agents with lower credibility.

To forge an optimal deal for your business, choose a reputed brokerage firm. Such brokerage firms deal with a range of insurance products, and are knowledgeable. Brokerage firms deal in insurance products of all insurers, claim settlement, application and submission procedure.

In any business, risks cannot be ruled out. In case of a small business, even a small risk can make a huge impact on the growth and sustainability of the business. This is more so with respect to finances as small businesses, by their very nature, are devoid of strong financial support.

If you are a small business owner, you need to seriously consider taking business insurance to protect your businesses from unfortunate events that cause financial crisis.

Besides providing financial support during unfortunate events, insurance helps in increasing the credibility of your business among your employees (crucial part of your business) – they feel secured knowing that they are covered under insurance policy.

While choosing an insurance policy, assess and identify the risks that are likely to affect your business significantly. Common risks for any business include, damage to business property, life hazards to employees, and public law suits. None of these is a small liability that you can afford to overlook.

Basic types of business insurance policies:
There are different types of insurance policies covering different types of risks; you can either choose one policy or combine a few of them to make a consolidated policy that covers every risk your business might face. Here are some basic insurance policies that you can choose from:

Business liability: Your business is always at risk of facing law suits from third parties. There can be instances that make your business the subject of a lawsuit – a customer trips on a torn carpet in your office, a customer falls sick using your product, an electrical short-circuit that causes fire and damages your landlord’s building etc. These liabilities usually result in huge compensation claims. In such cases, having business liability insurance protects you against all these risks. Business liability insurance generally covers medical expenses and legal fees.

Property insurance: You don’t want to mess up with your business property. Do you? So, make sure that your business property is covered properly. Property insurance for your small business covers the fixtures, furniture, the inventory, and other physical assets of business. Property insurance protects the property against the damage, theft or loss.

Auto insurance: You need commercial auto insurance if you use a vehicle solely for your business. You should get a commercial insurance policy if your vehicle has commercial tags on it. Auto insurance covers risks of damage to the vehicle caused by an accident or vandalism. It also protects you from the third-party liability claims if your vehicle is involved in any accident.

Workers’ compensation: As an employer, it is your responsibility to take care of your employees at workplace. If any employee falls sick, gets injured or dies while working, as a business owner, you will be held accountable. You need to take care of his medical expenses. Here, workers’ compensation insurance helps you by covering the risk of injury to workers and the consequent medical expenses, etc.

Not buying insurance would put your business at greater risk. It is also not financially sensible to ignore the importance of insurance. Working out the right type and the correct amount of insurance coverage is quite difficult going by the variety of risks to your business.

Insurance is a means to protect the businesses from unforeseen risks; it provides peace of mind to the business owners. However, choosing adequate insurance cover is crucial to leverage the benefits it offers. This article sheds light on the negative impact of under or over insuring a business and the importance of having adequate insurance cover.

Under-insurance or over-insurance – impact
Besides determining various risks that your business is likely to face, you also need to calculate the amount required to cover the risk to determine adequate cover, failing which you may face the following issues -

• Revenue loss: Under-insurance may cost you dearly. The low premium may initially attract you, but it may lead to revenue losses when the risk arises. If any risk arises and your business is not covered with adequate insurance, it may affect your business financially, as you have paid for an insurance cover that is less than its value and you have to bear with the loss of revenue.

• Business interruption: Being under-insured may lead to business interruption, because, if your business is not covered with adequate insurance, you have to endure losses in case of physical property damage or liability claims. Until you spend some money from your pocket to re-build the business, you may not be able to run your business. Business interruption, thus, halts the revenue you are generating.

• High premium rates: Over-insurance results in paying high premium costs, for a coverage that goes beyond the actual cash value of the risk that was insured by the policy holder. If your business is over-insured, and you are paying high premium, which is actually not required, you will be in a loss.

Adequate insurance and its importance: Incidents such as accidents, natural calamities like storms, etc. can result in interruption/closure of your business. Having adequate insurance coverage is, therefore, very critical to protect your business from such kind of risk. Following are two more benefits of having adequate insurance -

• Smooth business operation: If your business is insured with adequate insurance coverage, you can operate your business smoothly. You need not worrying about the risks that may occur in your premises.

• Resume operations after unexpected events: After an unexpected event at your business premises, you need to rebuild your business to resume operations. At this critical time, having business insurance is very helpful; it will cover the loss incurred. It helps rebuild your business and resume operations.

Determining the insurance cover for your business
Before you purchase insurance for your business, it is important to calculate the total value of assets and costs required to repair/replace them when an unforeseen event happens. For this, take help of tools such as property value calculator, replacement cost estimator, etc. which enable you to determine the coverage required for your business. This way, you can avoid the instances of both under and over insurance.

Take expert advice
After knowing the importance of having adequate insurance for your business, purchasing it on your own can prove risky, as you may miss on a few things. Therefore, it is better to take advice of insurance brokers as they will help you in choosing adequate insurance coverage after looking at all the aspects of the business.

Your business may be thriving well; however it might face difficulties which you cannot foresee. Purchasing insurance that covers all the potential risks to your business adequately is, therefore, a sensible business idea.

No matter the size or nature of your business, one thing that remains the same is the need for business insurance. There are many different aspects of your business that you’ll want to take into consideration when looking for new business insurance – or reviewing your current insurance coverage. Since every business is different, each one will have different insurance requirements. For example, a company that produces physical goods may need different insurance than a company which offers services. In either scenario, there are some similarities, and listed here are a few types of insurance that all businesses should consider.

Workers’ Compensation Insurance – for your employees

Workers’ Comp insurance is required by law in almost every state. It can provide coverage for medical costs and a portion of lost wages for an employee who becomes injured or ill on the job. Typically, this type of insurance only covers injuries or illness that occur on the job site – for example, if an employee slips and falls on a wet floor.

Since the laws regarding Workers’ Comp can be different depending on where your company is located, it’s important to work with an insurance professional to make sure you’re getting the coverage that’s required, as well as what you need for your particular business.

General Liability Insurance

General Liability Insurance is designed to protect you and your business from a variety of claims, including accidents, injuries, or claims of negligence. This type of insurance can help pay for things like property damage, medical expenses, libel, slander, legal costs, and faulty products. No one expects to get sued, but the reality is that it’s always a possibility. You don’t want to leave your business open to these types of situations, and the broader the protection, the better.

Professional Liability Insurance – “Errors and Omissions” coverage

Professional Liability Insurance can also be known as “Errors and Omissions Insurance,” or “Malpractice Insurance.” It protects you from lawsuits that allege negligence in providing professional services, providing shoddy work, or making mistakes or omissions. This type of insurance is particularly important if you have a service-based business, but can also be necessary for other types of businesses as well. Mistakes happen – so adequate Professional Liability Insurance can be helpful, even if you don’t think you’ll need it.

Property Insurance

The definition of “property” is broad, and can mean different things to different types of businesses. That’s why it’s important to make sure you carry adequate Commercial Property Insurance. Without this type of insurance, most small businesses wouldn’t be able to replace their equipment should something happen to cause damage or destruction. Property covered by this type of insurance can include buildings, computers, inventory, supplies and equipment. There are two types of Property Insurance: “all-risk” policies cover just about everything, and is a good way to avoid duplication or overlap of coverage, as well as gaps in trying to cover your liabilities. “Peril-specific” policies, or “named-peril” coverage applies only to particular perils that are specifically named in the policy. They’re usually needed when there is a high risk in a very particular area.

Life Insurance / Key Executive Insurance – protection and benefit

Offering life insurance for employees can be a valuable benefit when trying to attract high-quality employees. A business can even offer additional coverage for executives. These employees are deemed to be crucial to the running and success of the business, and may sometimes require additional insurance, above and beyond what the normal employee benefits provide. This can be another benefit in attracting top talent.

A business can also offer special “Key Person” policies for employees without whom the business could not function. Key Person Insurance protects against a key employee’s unexpected death – often times the benefit amount equals the expected revenue loss and costs required to find and train a suitable replacement. The business pays the premiums, and the insurance is considered a business asset.

It’s possible to combine some of these basic coverages as a package policy, often referred to as a Business Owner’s Policy, or BOP. Many insurance companies bundle certain coverages, and this can save you money, as long as you make sure you get the proper type of coverage.

Even if you feel you have adequate business insurance coverage that meets all your current needs, it’s still advisable to review all your coverage on an annual basis, to make sure that your coverage continues to provide everything that you need. This is particularly important if you or your business have experienced any major changes, such as change in family status, or a significant increase or decrease in business activity. Additionally, be sure to work with a reputable, licensed insurance agent or broker, who has knowledge regarding business like yours.