So you’ve ditched the 9-5 and decided to go it alone. That’s no small feat. You’ve done the hard part, and now it’s time to think about protecting your new empire.
Do you know what your small business insurance needs are?
Risky business
44% of small businesses don’t have business insurance yet. And most say it’s because their business isn’t big enough to warrant it.
But don’t be fooled. If anything, the smaller you are, the more financial and legal help you’re going to need if a claim’s made against you.
Because even something small, like spilling coffee on your laptop, can spiral and end up costing your business £thousands. And nobody wants that.
It makes sense to save yourself the stress and get covered. It means you'll have peace of mind, so you can crack on with being your own boss (and bossing it).
Why do you need insurance for a small business?
We understand. You’re small, or just starting out, and the budget’s tight. Insurance is expensive, right?
Depending on what insurance you get, you might be pleasantly surprised at how little it actually costs to insure your business. And besides, reducing risks and protecting your assets is essential.
Whatever you spend on insurance will most definitely cost less than having to defend yourself from a claim. Or get your business back on its feet after a disaster.
You’re not a big, multi-national corporation with millions of pounds in the bank and lawyers at your beck and call. A disgruntled client, a nasty accident, or a cyber-attack could bring your small business down if you don’t have the right insurance to help.
So here's a breakdown of the types of small business insurance you actually need. Plus some other things you might want to think about to keep things going in the right direction.
Must-have insurance for small businesses
So, let’s get down to it. First off, set yourself a budget. It’s about finding a balance...What can you afford without skimping on vital protection? Using a broker is a good way to get what you need for the best possible price.
Then, think about what you do. What are the biggest risks you face?
Chances are you’ll need either professional indemnity (PI) insurance or public liability (PL) insurance to cover those risks. Or possibly both.
PI is there when you make a mistake in your work or are accused of not doing your job properly. It covers you for negligence claims, amongst other things, and so is needed for anyone who offers a service or advice. Think architects, engineers, consultants, therapists, and so on.
PL covers you for accidental injury or damage. So, this one’s for any small business that comes face-to-face with clients or customers. Coffee shops, beauty salons, photographers, and the like.
And, one not to skip if you have employees, even if it’s just one or two part-timers, is employers’ liability insurance. You have to have it by law.
Small business insurance you should consider
So, what other types of insurance does a small business need?
Once you’re sorted with the big stuff, think about what other aspects of your business could cause problems and cost you money.
You can usually add different kinds of insurance to your policy. What you’re offered will depend on what your business does.
Do you work primarily online? 96% of cyber-attacks are aimed at SMEs. And they’re not easy to recover from. Most businesses rely on IT in one way or another, so cyber insurance should be on your radar. Especially if you hold sensitive data about your clients or customers. Or your business couldn’t run efficiently without your computer or IT system.
If you work from home or an office, then business contents is a good one to consider. Or if you’re out and about with lots of equipment - photographers or videographers, for example - then portables insurance with equipment breakdown cover is definitely needed.
Industry-specific cover
In certain industries, rules and regulations will determine what types of insurance a small business should have, and the level of cover.
Sometimes your small business insurance requirements will already be set out for you. Either by governing bodies or by client contracts.
For architects, professional indemnity insurance is compulsory. You can find out more about this on the RIBA website. For anyone working in the construction industry, it’s not unusual to see PI insurance being asked for in client contracts. Especially if you’re working on big projects.
For aestheticians, there’s a specific type of insurance called medical malpractice AKA treatment liability. Regulations say you must have this insurance to operate. It’s like professional indemnity insurance that’s tailored specifically to the aesthetics industry.
If you run a charity, community group, or something similar, you’ll want to think about trustee indemnity insurance. For organisations like this, one of the biggest threats is trustees being accused of not running things properly. And as they’ll be personally liable if they are, that means their personal finances and assets are on the line.
And for tradesmen, don’t forget about tools and equipment insurance. Without your tools, you won’t be able to work. So it’s super important to protect them!
More to think about
And that’s not all…(it’s a minefield, we know!). There are some other useful kinds of insurance you can bolt onto your policy to make it really watertight.
Legal expenses insurance can help you out with things like pay or contractual disputes, as well as issues with tax or health and safety investigations.
If your small business is struck by a natural disaster, or an unfortunate accident puts your place of work out of action, business interruption could be a real lifesaver. While buildings and contents will pay to replace anything you’ve lost, business interruption is there to keep you afloat until everything’s back to normal. It’ll cover any lost income, pay for you to rent a temporary office, or hire equipment, for example.
Ready to click 'go'?
Once you’ve made a decision on what your small business insurance policy is going to look like, it’s really important you read all your policy documents. Sure, it’ll be a bit of a slog. But you need to know the ins and outs.
As your business grows and changes, it’s important to continuously reassess your small business insurance needs. If you’ve ventured into new things, don’t assume you’re still covered. Speak to your broker or insurer and tell them what you’re getting up to.
If your business turnover has increased, that could affect the levels of cover you need, so make sure you tell your insurer about that too. Or if you’re thinking about travelling or expanding your business into new countries.
How to insure your small business
Hopefully you’re a little more clued up now on what insurance is needed for a small business. But do you know how to get it?
As you’ve probably figured out, business insurance can get complex. And even if you’re really clued up on it, it can be hard to find the time to shop around for various types of insurance. You’ve got a business to run after all.
That’s why using a broker can be really beneficial – they’ll do a lot of the leg work for you. Not only can they help you get the right insurance in the first place, but they can also support you with insurance advice throughout your business journey. And most importantly, they’ll be there to fight your corner and help you make sense of things should you need to make a claim.
Want a second opinion?
We’re a broker who specialise in insurance for small businesses, freelancers, charities, and community groups. Want to talk some more about your small business insurance needs? We're authorised by the Financial Conduct Authority (FCA) to give you advice. So just give us a call on 0345 222 5391.
Image used under license from Shutterstock.
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