Business Insurance for UK retailers: what cover do you need?

POSTED: 14th May 2014
IN: Guides

Surprisingly few types of cover are actually required by law. However, not taking out additional forms of cover could leave outlet owners woefully ill-equipped to deal with claims made against their business.

All small businesses are vulnerable to cash-flow problems in the event of a claim being made against them. For the retail sector in particular, with the risk of damage and theft to stock and continuous public presence, there is a wealth of scenarios in which business insurance may be required.

 In this post, we’ll detail some of the most important forms of business insurance for retailers and highlight why each of them is so important to the strength and longevity of the enterprise.

First and foremost, let’s take a look at the obligatory insurance: employers’ liability.

undefinedEmployers’ liability

From the second that a business recruits its first member of staff, employers’ liability insurance is a legal requirement. This kind of insurance basically covers any compensation and legal fees in the event that one of your employees is injured or becomes ill as a direct result of their work.

Whether or not you believe your workplace presents a hazard to your employees or not, the fact is that more than two million people in the UK believe that their job has caused them to suffer an illness or injury and an estimated 95 per cent say that it’s important to claim compensation in this instance. It’s important to note that ‘illness’ doesn’t refer solely to physical conditions, but work-related stress or anxiety, which can result from too much pressure or even workplace bullying – the kind of things that are sometimes very difficult for employers to recognise, let alone prevent.

By law your policy must cover claims of up to at least £5m – though most policies actually start at £10m – and it’s not difficult to see why. According to the Association of British Insurers (ABI), the industry has been making a loss on employers’ liability for several years, with the sheer volume of claims meaning that insurers have been paying out more in customer claims and expenses than they received in premiums.

Optional forms of insurance

As well as the obligatory employers’ liability, there are a number of optional forms of cover to choose from that will help to ensure your shop financial protection in a range of common eventualities.

So let’s take a look at these optional extras in more detail:

Product liability

If you have sold a product that goes on to harm or injure its end user, you will most likely have legal liability. A product liability crisis can strike at any time and whether or not your company is directly responsible for the defect, any party involved in the chain of distribution can be named as a defendant in the subsequent lawsuit.

Under ‘joint and several’ liability, every defendant can be ruled “jointly” (together) and “severally” (separately) responsible for the award of damages. This means that once the damages have been awarded, the various responsible parties are left to decide amongst themselves how to divvy up the damages between them.  With compensation awarded to cover anything from minor medical expenses to serious lasting health complaints and even legal fees in some cases, these kind of cases are enough to put a company out of business.

Public liability

Every day in 2006, the UK insurance industry paid out £3.3m in general liability claims. This includes bodily injury, illness or disease to members of the public.

Naturally, public-facing small businesses like shops and bars have a more pressing requirement to ensure this kind of cover is in place, as members of the public are frequently entering the premises. If a customer was to trip over a wire or injure themselves on a sharp object, like stray knives or scissors that have been left around the place, then you will be responsible.

In an increasingly litigious society, cover for this is especially important as the cash-flow issues arising from a claim made against a business can easily put a huge strain on operations.

Buildings and contents

All business premises in the UK are at risk of theft, fire and flooding, but this applies to some more than others.

Take theft, for example. Recent government research based on interviews with 4,017 respondents revealed that 9.2 million crimes were encountered by UK businesses across manufacturing, wholesale and retail, transportation and storage, and accommodation and food industries in 2012 alone. Of these, 7.7 million – or 82 per cent - of crimes were committed against businesses in the retail sector, largely in the form of shoplifting. Over the course of 12 months, the industry encountered a total of 19,701 crimes per 1,000 premises – or approximately 20 each per annum.

Likewise, no businesses are exempt from the risk of fire or flooding and where the lifeblood of your business – stock – is at risk, you’ll need to put serious consideration into how much cover you need to keep your business afloat should the worst happen.

Business interruption

In the event of flood, fire, burglary, or anything else that forces your business to cease trading or relocate, business interruption insurance allows you to claim for the increased cost of working. This might mean that you claim for relocations costs, the cost of advertising your new or temporary location or to cover loss of gross profit.

Over to you

Whilst this is by no means an exhaustive list (you may still need to check out things like trade credit Insurance, key person insurance or employee dishonesty), it should go some way to highlight the importance of business insurance for retailers. Most insurance companies or brokers will offer a package of products that can be tailored to suit their client’s unique needs, so for best results, be sure to seek expert advice before you take out any policy.

For more information about your business’ insurance requirements, don’t hesitate to get in touch.


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