Working out your insurance needs
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With premiums spiralling out of control, record numbers of business are opting to break the law and go without insurance cover. Unless you're set on a future behind bars or can see into the future to ensure nothing will ever happen to you, your business or anyone that interacts with it, we suggest you don't pursue that route.
That said, if you took out every insurance policy on the market you'd be unlikely to have any cashflow left whatsoever. So what do you need, what should you think about getting and what's not really worth having?
There are two mandatory insurance requirements all business owners should be aware of. While they are mandatory they only affect you if you have employees or a commercial vehicle.
The most important of these is Employers’ Liability (EL); if you employ anyone, even on a casual basis or part-time, you’ll need this cover. EL will cover the cost of any compensation you may have to pay out if your employees are injured, or they suffer an illness caused by work.
If you use a vehicle for business – no matter if it’s your own car or a company van - you must have motor insurance. If you use your car for work, as well as personal use, you need to make sure that your insurance certificate covers both types of use and this will mean extending your existing policy to Class One.
If you want other drivers to use your car for business use then you’ll need Class Two cover. And if you need to be covered for commercial travelling (ie travelling from place to place in search of customers) then you’ll need Class Three cover.
If you have a van or car used specifically for business you may also need commercial vehicle insurance. This cover should provide you with a courtesy vehicle while yours is being repaired and third party cover for any trailer attached to your vehicle.
Here’s a quick round-up of the most important areas any business insurance policy should cover. Don’t be tempted to cut corners, you could find yourself paying for costly legal actions if you haven’t got adequate cover.
Your property
You will almost definitely need contents insurance and you might well need buildings insurance too. If you lease your premises check with your landlord to find out who is responsible for insuring the building. Both buildings and contents should be insured against a range of risks including fire, theft and flood and for the full cost of replacing them. This coverage can also be extended to include accidental damage.
Business interruption
This covers you for any costs incurred should your business suffer a fire, flood or theft. These costs include moving to other premises while yours are being repaired, covering the cost of temporary rental equipment and any loss of income or profit.
Deterioration of stock
If you sell food or other perishable goods you’re going to be in trouble if your freezer breaks down for example, which is why you need to be covered for deterioration of stock.
Portable equipment
This covers items such as mobile phones and laptops against fire, theft and accidental damage both on and off your business premises. For anyone that spends a lot of time travelling as part of their business, this cover is crucial.
Goods in transit
If you need to haul your products around the country then it’s worth investigating goods in transit cover. This covers the items being transported for damage, loss or theft whether they’re being carried by road haulier, courier, by post or in your own vehicle. The policy should also cover you for other business journeys such as door-to-door deliveries and making trips to the cash & carry.
Business money
Covers the loss of cash or cheques either from your premises or in transit.
The following types of insurance serve a dual purpose; they can provide compensation if you suffer financial loss or damage and they also provide protection if you’re the subject of legal action.
Public liability
This protects your business if it’s held legally liable for personal injury or damage to property.
Product liability
If you manufacture or supply goods, there’s always the chance that your products could cause damage to a third party or to property and that’s why you need cover for Product liability.
For more on Product Liability click here Product liability
Professional Indemnity Insurance
This cover is important for professionals offering a service or advice and it covers you against claims that might arise because your work was negligent or mistaken.
For more on Professional Indemnity Insurance click here Professional Indemnity
Creditor Insurance
This protects a lender if you can’t meet your loan, overdraft or HP repayments due to an accident, sickness or death.
Partnership Protection/Shareholder Share Purchase/Key person cover
In a partnership or limited company, if one of the partners/shareholders dies, or suffers a critical illness, the other partners/shareholders are often financially vulnerable. This insurance covers you for the possible costs involved.
You may want to think about investing in Director Share Purchase, this protects the interests of co-owners of the business and family members in the event of death. Essentially each owner agrees how much his share is worth and legal papers are put in place to makes ure that should anything happen the co-owners buy out the family of the deceased for a fair value.
Permanent Health insurance
This cover gives you a replacement income if you’re unable to work due to an accident or illness or you need an operation. The insurer usually pays benefits until you return to work, reach retirement age or die.
You might also want to have private healthcare for yourself and your staff – in this case you should also investigate Private Medical insurance cover.
Critical Illness insurance
Pays out a lump sum if you suffer an illness that’s not fatal and can be used to protect a partnership or key person. It’s very important to check the small print here, especially if the person you want to insure has had previous illnesses.
Legal expenses
This covers the pursuit or defence of legal actions. Comprehensive policies will include costs incurred in employment disputes, tax audits, investigations and tribunals.
Intellectual Property Protection
Intellectual property could well be one of your business’s biggest assets is its intellectual property – designs, inventions and so on – and you should protect this asset. Be warned, many inventors have lost control of their patents because they couldn’t afford the cost of defending them.
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