Having already addressed the dangers of the digital economy this blog goes on to explore how different forms of business insurance can help small companies safeguard their future.
When starting out alone, there are many risks that solo business owners will not have to consider. However, since freelancers rely entirely on their own efforts to bring in income, personal insurance can be an important measure to ensure financial stability should any health issues arise. Understandably, for businesses of all sizes, owners must also hold third-party motor insurance at the very least for any vehicles run by the firm.
Naturally, as the business grows, new challenges emerge where insurance is concerned. All SMEs with one or more staff members are required by law to possess an employers’ liability insurance policy covering illness and injury claims of up to £5m. Of course, firms in industries which involve a greater degree of risk, whether in terms of physical exertion or work-related stress, may wish to extend this coverage.
Beyond employees, for many SMEs it may also be prudent to put measures in place to deal with situations involving clients and members of the public. Product liability insurance and public liability insurance can both offer peace of mind in case any customer should suffer an injury, illness or damages caused by the company’s products or premises. Professional indemnity insurance, by contrast, will cover compensation claims in cases where the company’s actions or advice have caused a client to suffer a financial loss.
SMEs should also be aware that 9.2 million cases of theft or vandalism were committed against UK businesses in 2012, according to a Home Office Study, underlining the potential benefits of arranging buildings and content insurance. This is particularly true for public-facing SMEs, such as those in the retail sector, which experiences a greater prevalence of this type of crime.
Importantly, businesses must check the level of coverage provided when taking out a policy, paying particular attention to whether adverse circumstances such as flooding or fires are included. A recent YouGov report showed that 52 per cent of small businesses hold cash reserves of £10,000 or less, and one in five hold no cash reserves at all. Given average monthly fixed costs of £20,000, this suggests the majority of businesses would most likely be forced to close within two weeks, if unforeseen events forced them to put trading on hold.
Alongside taking out the relevant policies, creating a plan of action for staff to pursue following an event that threatens the firm’s security is a valuable precaution, helping to limit the extent of any damage.
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