Does your business need insurance?
Managing your costs in the early stages of setting up a business is important, and when it comes to purchasing insurance you may be asking yourself is insurance necessary?
When starting a business there are three main questions you should consider to understand whether you should invest in business insurance:
- Could you afford the cost of a claim? – The cost of a claim is likely to significantly outweigh the amount you spend on your insurance premium.
- Do you have a legal obligation? – The only insurance that is mandatory for businesses in the UK is employers liability insurance, but only if you employ staff. If you do have staff you could be fined if you don’t have this cover in place.
- Will insurance help you grow? – Depending on the industry you work in you may find clients require you to have adequate insurance to enter into a relationship; likewise, membership of any professional organisation or trade body may require you to have certain covers in place.
What does business insurance cover?
Once you’ve decided to purchase business insurance, understanding what cover you need can seem confusing. Faced with another admin task in order to set up your business, insurance could find its way to the bottom of your to-do list, but getting the right cover for your new business is likely simpler than you think.
Business insurance is a broad term that represents a combination of different insurance products or covers. Each individual cover is designed to protect your business against legal and compensation costs arising from specific types of risk, and is different in the protection it provides.
The specific covers you choose to make up your business insurance policy should be tailored to the risks your business is likely to encounter.
Selecting your specific covers
It’s important to purchase only the covers that apply to your business in order to avoid overpaying for your insurance. Likewise, not including relevant covers will leave you open to being underinsured in the event of a claim.
There are many different types of cover available, the options that are right for your business will depend on what it is you do, the industry you work in and the size of your business. There are, however, some common covers that most businesses should consider.
A popular cover for most businesses, public liability covers legal and compensation costs if a member of the public – anyone who isn’t your employee – is injured, or their property damaged, due to your business’s negligence.
Legal and compensation cover for businesses that offer professional services, such as advice and consultancy, including claims like breaches of contract and acts of errors or omissions.
Similar to public liability but rather than members of the public it covers legal and compensation costs if one of your employees is injured or suffers damage to their property during the course of carrying out their work.
This cover is mandatory for employers in the UK. If you are an employer and you don’t have this cover you may receive a fine of up to £2,500 for each day you didn’t have it!
Cyber liability is designed to cover risks that come with storing and handling sensitive data, such as accidental privacy breaches, hacking and cybercrime. This cover also protects against business interruption as a result of a cyber security breach affecting your systems or those of your suppliers.
Whilst some insurers bundle up their covers, Superscript’s flexible business insurance allows businesses to tailor quotes to provide a policy.
Choosing your limits
Once you’ve decided on your covers you may also need to choose what limits of cover you require. In simple terms, limits are the maximum amount your policy will payout in the event of a claim.
Choosing the correct limit is another way to make sure your business isn’t over or underinsured, generally the higher the limit you choose the more cover you’re purchasing and therefore the more you’ll pay.
Setting your excess
Lastly, it’s also worth taking note of the excess on your cover. Excess is the amount you will pay towards making a claim, and can usually be adjusted. Generally, if you choose a higher excess you’ll pay a lower premium by taking on more of the cost of any claim.
Why is it important to get the right insurance?
There are two main reasons you should take the time to make sure you have the right coverage in place and that your insurance is tailored to the unique needs of your business.
First: having the incorrect cover from the outset is the number one reason claims are unsuccessful.
Second: purchasing unnecessary covers or choosing higher limits than your business needs will mean you are paying more than you need to for your insurance.
Getting your insurance set up
Getting your insurance set up can be a simple process. When setting up your policy it’s important you provide accurate information to make sure your cover is relevant and can be relied upon in the event of a claim. To set up your insurance you’ll typically need the following information:
- Your business type – whether you set up as a sole trader, limited company or partnership
- What your business will do – what industry do you work in, what type of work do you carry out?
- Your estimated turnover – how much money you expect to receive for your work over a 12 month period?
- Where your business will operate – if your work will cover the UK only or serving other territories too
- Your employees – if you have any, you’ll most likely be asked some details about them
- When do you want your cover to start – even if you’re not trading yet, you may have stock or equipment to cover right away, or you can set a date in the future for your cover to start
There may be some other information required to get the right cover for your needs, depending on what your business does.
So what? How do you get business insurance?
You have many options. We have partnered with a great company, Superscript.
They get you sorted quickly and at a very affordable price. Always do your homework, and check that you are getting the best price.
Superscript provides flexible and affordable business insurance for as little as £5 per month. They do everything online and in minutes. We sort of like that at MachFast.com.
We’re not saying they are the only choice you have or the best thing since sliced bread, but you could do a lot worse than Superscript. If you end up using them, we will get a small commission. If not, perhaps Superscript will be a great way for you to start your research. We would be happy either way. If this article helped you out to sort one more painful admin thing – great!