What is small business insurance?
Small business insurance is various types of insurance commonly needed by small businesses. Although these insurances can be bought individually, they are usually available together, and more cheaply, in insurance packages. We will be covering the types of insurance helpful to small businesses and also some of the packages that are usually offered.
Do I need small business insurance?
Yes. Insurance helps protect both you, the owner, and your company from risk. Without business insurance, you may need to pay out of pocket for debts the company has incurred. As a company is usually a far larger entity than the people who own it, the debts it can incur are usually far greater than the owners can pay. This can leave owners financially devastated.
However, even in the case of a limited liability company, where the owner’s personal assets are protected, insurance may be crucial for the survival of the company. If the business incurs debts that it cannot recover from, the enterprise will go under. This would waste your investment of time and money, all because of a lack of small business insurance.
Types of Business Insurance
1. Business Owner’s Policy (BOP) Insurance
This type of insurance is a package combining business property and business liability insurance. Often you can customise this package to include other insurances that fit your business model.
The BOP package often comes with business income insurance too.
As the standard level of insurance, it is the staple insurance for many small businesses.
2. Business Income Insurance
This insurance protects against any damages or “disasters” that might affect your business. For example, fires and thefts are commonly covered by the insurance company. Their cover mostly includes paying for any lost revenue due to the businesses closure.
In addition, this type of insurance also covers costs of moving the business temporarily to another location which happened as a result of damages.
3. Employers’ Liability Insurance
This type of insurance covers the costs of any employer injured or made sick while working for you. In addition, it also covers any damages your employees have made by accident. For instance, if you own a removal firm and one of your employees, while removing a sofa, chips your clients wall, this insurance will cover the damages.
For the majority of small businesses with employees in the UK, employers’ liability insurance is mandatory. If it is essential for your business, you could be fined up to £2,500 for every day for not having it.
4. Professional Indemnity Insurance
This type of insurance is very useful for businesses which give professional advice. This is because professional indemnity insurance covers against losses your clients incur as a result of your advice.
However, it is also very useful to businesses outside of the service sector as it protects against unintentional copyright infringement, loss of documents, libel or unintentional confidentiality breaches.
5. Business Contents Insurance
Similar to normal content insurance, business content insurance covers the personal possessions of the enterprise. Naturally these are usually larger physical assets, for example, heavy machinery or office equipment.
Whether it is covering office supplies for a home business or a fleet of cargo trucks for an international shipping company, this type of insurance is helpful for almost all businesses.
6. Stock Insurance
Stock insurance covers the loss of any inventory your business owns. Even if that stock is a physical asset under the roof of your business, any inventory is not covered by business contents insurance. Hence why it is a good idea to get stock insurance if you deal with large amounts of goods.
7. Public Liability insurance
Public liability insurance is useful for businesses that deal with physical customers. It protects against customers who have suffered a loss and want to sue your business.
Imagine you own a Cafe and someone slips on a recently cleaned floor, injuring themselves. If the client then tried to pursue a legal claim against your business for injuring them, this insurance would protect you.
This insurance also covers scenarios when your business is the customer. For example, if you’re a cleaning company and you use the wrong detergent on a rug. The insurance would cover the costs if the clients rug was damaged.
8. Product Liability Insurance
This insurance covers your liability for any products your business produces that injure a client. This suits businesses on every level of the production chain as you can be liable for injuries even if you didn’t make the product.
9. Commercial Property Insurance
This covers any damages that may happen to your business property. For many small businesses, the property they are based in is not only crucial to running their business but it is also too expensive an asset to replace if the building burns down, for example.
Small businesses that particularly benefit from this type of insurance are cafes, bars, pubs etc. If their property becomes unusable then not only will they find it difficult to acquire the funds to fix it, but also they won’t be able to generate the funds through their profits.
10. Car Insurance
You may need to upgrade your car insurance if you have a business which involves driving clients around or letting other employee’s use your cars.
Although this, at first glance, might seem only useful to taxi companies, there are plenty of instances where businesses drive their clients around. For example, estate agents.
Bear in mind that even if you are using your home car to drive round clients, additional insurance is needed to cover your liability in a crash.
If you are looking at the insurance for your business, you are likely in the planning stage of your enterprise idea. Often insurance is overlooked when calculating your startup budget and, as you’re looking at it now, you are likely already a step ahead of your competition.
Our blogs offer free business advice for anyone looking to start a new business and establish it in their market.
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