For small and medium-sized businesses (SMEs) in the UK, insurance is an essential part of risk management. Insurance policies protect against several factors that can threaten business operations. Here we take a look at which insurance policies are mandatory or advisable for your business.
If you run a B2B company, you are responsible for yourself, your employees, and your business partners. This means you have to consider liability issues that can have serious consequences for your company, or even cause it to fail. To protect yourself from risks, you can take out a variety of insurance policies.
Which business insurance policies are required by law?
Employer’s liability insurance
Il Employers’ Liability (Compulsory Insurance) Act 1969 states that if you employ anyone, whether full-time, part-time, casual or temporary, you must take out employer’s liability insurance, which covers compensation claims made against you by your employees. It is the only type of compulsory insurance for businesses in the UK. If you are self-employed, you do not need employer’s liability insurance.
You must obtain Employers’ Liability (EL) insurance as soon as you become an employer. Your policy must cover you for at least £5 million and must be from an approved insurer. You can be fined £2,500 for every day you are not adequately insured.
You must also show an Employer’s Certificate of Responsibility (can be a digital copy, as long as it is accessible to all your employees). If you fail to produce your EL certificate or produce it when asked by inspectors, you could be fined £1,000.
Car insurance
If your business uses vehicles, you are legally required to have commercial motor insurance. In some cases where vehicles are a key part of your business, for example if you have a taxi company or courier service, you may need a specialist insurance policy.
Third-party auto insurance is the minimum required by law. This covers you if you are responsible for an accident and a third party makes a compensation claim against you. However, it is wise to have comprehensive car insurance. This covers not only your liability to third parties, but also theft or damage to your vehicle, fire damage, medical expenses and the cost of replacing a vehicle’s contents. Theft is a particular risk for many small businesses, as vans containing tools or equipment are more likely to be targeted.
Which business insurance policies are recommended for SMEs?
Civil liability insurance
It covers claims made against you by third parties. If your business interacts with the public, you should have liability insurance. It offers financial protection in the event of an injury or property damage claim made by a customer, consumer or member of the public.
Public liability insurance is particularly important if customers visit your business premises, if you work on customer sites or in people’s homes or gardens, or if you work in public areas and could potentially cause injury or damage to members of your public. It can help cover the cost of legal fees incurred or payments resulting from a claim if you are found liable.
Although public liability insurance is not a legal requirement, many customers will insist on having it. Some trade associations will not allow you to register with them if you do not have liability insurance. Contracts with local authorities also usually require proof of liability insurance.
Property insurance
Property insurance covers accidental damage or theft to your property. Again, it’s not a legal requirement, but if anyone has a insurable interest in the property you own or use, they may require you to have a property insurance policy. Examples of people with an insurable interest are those who have lent you money to purchase a property or who have rented or leased equipment to you.
Specialized insurance
Depending on your industry, you may also need additional, specialized insurance coverage. The most common types of insurance for SMEs are:
- portable equipment insurance: if you or your staff regularly use equipment outside of company premises (such as laptops, mobile phones, tablets or even tools), you can choose to insure them separately to cover you in the event of loss or theft
- cyber insurance (sometimes called cyber liability insurance) to cover financial losses suffered by you or your business resulting from events such as unauthorized access, cyber attacks or privacy breaches.
Source of Europages
