Getting the right business insurance for your small and medium-sized business (SME) is vital to protect your business and employees.
Depending on the business you run, you may be legally obliged to get specific types of insurance and the type of insurance your SME requires depends on the risks your business is exposed to.
Key insurance issues that you need to consider include insuring your business and assets, protecting yourself and your staff and how to present the risks to your business to an insurance adviser.
Before you take out a business insurance policy you can document and present the risk to an insurance broker through a comprehensive risk assessment and by providing details of training policies.
This will include details of previous insurance claims and may mean you get a reduction in your insurance premiums.
What to look for in an insurance policy
When selecting an insurance policy, you need to check that it has the right policy features by asking yourself several key questions
Does the policy cover claims of negligence from mistakes made by your business?
If you are sued, will the insurance policy cover the costs of a lawyer and legal expenses to defend a law suit, even if your firm has not made a mistake?
If you run a specialist business, choose a specialist insurer or at least make sure the insurer you choose has experience of insuring firms in your business sector.
Check to see that the company you are using has a good reputation.
Does the policy cover claims arising from work done outside the United Kingdom?
Make sure the policy includes cover for employees, temporary staff and independent contractors. If the work is done on behalf of your business, their actions should be covered under the policy.
What to insure?
An SME will typically need to insure its premises, fixtures, fittings, equipment and stock against disasters such as fire, flood and theft.
Businesses are legally obliged to have certain types of insurance including employers’ liability insurance cover worth at least £5 million for most types of employees, motor insurance for an SME’s fleet of business vehicles and professional indemnity insurance for businesses operating in areas such as accountancy and law.
Your firm should set an annual review date so that you can assess your level of cover and ensure it is at a suitable level as your business grows.
An SME needs to weigh up the cost of the insurance premiums against the level of risk.
Insurance protects your business assets. The cost of insurance depends on the insurers’ judgement of the likelihood of you having to make a claim and the amount they would have to pay out in the event of a claim.
Business premises insurance
The place where you conduct your business is very important and you need to make provision to protect this and be able to continue business operations if there is damage to your business premises from a storm, floods, fire, explosion or any other reason.
You also need a separate insurance policy for the assets within your business premises such as stock, IT equipment, machinery and other items.
You can choose between replacement as new insurance or indemnity insurance. Indemnity insurance deducts the cost of wear and tear when settling a claim and is popular with many SMEs
A business interruption policy insures against loss of profit and costs to the business from damage to machinery or other incidents or situations that mean you cannot carry on your ordinary work.
Depending on the type of business you run, it may be wise to take out specialist insurance for your business assets.
All vehicles used by your business need to be covered by an insurance policy. All vehicles owned by your business need to be insured and any employees’ vehicles used for or in connection with business need to have their insurance extended to cover use for the firm’s business.
Business insurance if you work from home
If you work from home, you may need a specialist insurance policy. Household insurance will not cover any loss of office equipment and it won’t provide public liability cover.
Employers’ liability and professional indemnity cover
This protects you against any legal liability for any damage or harm caused by your business, its products and the services your firm offers to customers or the public.
It is vital to insure against these risks as damages can be high and could potentially put a small firm out of business.
Protect yourself and your business
SMEs are dependent on their employees, in particular the owner or manager of the firm, so you need to assess whether you need insurance to protect yourself and your business if illness or injury prevent key staff from being able to work.
Types of insurance protection that are available include critical illness cover, income protection insurance, private health insurance, life insurance, permanent health insurance and personal accident cover.
Insurance as an employee benefit
Life and health insurance is a valuable benefit to offer your employees. It can play a major role in helping you attract and retain good quality staff.
Losses and claims
If you need to make an insurance claim, you need to let your insurer know as soon as possible and then under law you need to show the insurer that you have a valid claim under your policy.
If you think the loss or damage is due to a criminal act then you need to report it to the police immediately.
What type of insurance?
As with all insurances, you need to choose the right policy that provides the correct level of cover for the risks that come from your business.
It is important not simply to choose the cheapest policy otherwise your SME may be exposed to risks that are not covered and could end up costing your business large amounts of money, potentially putting the firm out of business.
The type of insurance you need will depend on the business you operate. It may make sense to have more than the legal insurance required to provide protection across all aspects of your business.
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