Compulsory Insurances
Employers' liability
This is compulsory to cover your employees. By law you must have at least £5 million of cover from an authorised insurer, although a minimum of £10 million is now provided by most policies. You must display the certificate of insurance in the workplace.
If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory employers’ liability insurance.
Limited companies with only one employee, where that employee also owns 50% or more of the company’s shares, have also been exempt from compulsory employers’ liability insurance.
Motor vehicles liability for company vehicles
This is compulsory and must cover at least third party insurance: this is the legal minimum.
Optional Insurances
Public liability
Although strictly this is not compulsory it is highly advisable. It covers against claims for damages to third parties.
Property
It is possible cover to specific risks such as fire and flood or providing more general cover but you must 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
This may not apply to your business if it does not involve expensive items of equipment. If you do decide to provide cover for theft then an insurer will require a reasonable minimum level of security.
Professional indemnity
This is mostly applicable 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. It is also 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 can often be dependent on key members of staff. What would happen if they became seriously ill or died? Key man insurance covers a 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.
Level of cover
With all of the above it's important to consider the right level of cover for your business. 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 an excess on any policy, make sure that it is set at a sensible level.
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