Business insurance: the key information
insurance, also known as commercial insurance, is an umbrella
term for a number of different types of policies that protect your
business against a range of risks. The type of policy, or policies,
you choose to cover your business - and the price of the premiums
you pay for them - will depend largely on the nature and scale of
your operation and your own attitude towards risk.
However, in its most basic form commercial insurance covers the
structure and contents of your business premises and - if you have
staff - employers' liability insurance.
What kind of business insurance am I required to have by
Again, it depends on the nature and scale of your company. If
you're a sole trader with no employees and no premises, the answer
is absolutely none. However, there are three types of cover that
are legally required if they're applicable to your operation. They
- Employers' Liability Compulsory insurance (ELCI)
- Motor insurance
- Professional Indemnity insurance (PI).
What is Employers' Liability Compulsory insurance?
If your business has one or more employees, you are legally
required to have ELCI, which protects your business from financial
claims made by staff as a result of illness or injuries sustained
while in your employ.
By law, you're required to have a minimum of £5 million ELCI
cover. If you don't have it, you could be fined up to £2500
a day by the Health and Safety Executive (HSE).
You are exempt from needing ELCI if your business meets any of
the following criteria:
- A non-limited business that only employs family members
- A sole trader or partnership where the owners/employees own at
least 50% of the trading company.
What does a standard commercial insurance policy cover?
A standard commercial insurance policy typically offers cover in
four key areas:
- Business premises and its contents
- Public liability, which covers legal liabilities in respect of
claims by third parties for injuries suffered or property damaged
arising out of the business. The legal costs of both the claimant
and the insured are included in the cover
- Product liability, which is protection against financial damage
caused as a result of a member of the public suffering harm as a
consequence of using a product sold by your business.
In addition to these four common areas, a standard commercial
insurance policy can be adjusted to suit the individual needs of
your company. This might include, for example:
- Business interruption insurance. Your premises and its contents
are insured by a standard commercial policy, but additional cover
is required to insure you against loss of business income following
a claim under the buildings or contents cover (for example, there
may be a period of inactivity while your fire-damaged premises is
being rebuilt). Business interruption insurance can include cover
for loss of business income for outstanding debit balances where
records are lost following damage, denial of access as a result of
damage to premises in the vicinity or closure due to a failure of
- Cash on premises insurance
- Goods in transit insurance
- Travel insurance
- Credit insurance.
What other types of insurance might I consider?
In addition to standard commercial insurance, Make It Cheaper
offers three other types of insurance policies that you might
consider taking out, depending on the nature of your business.
1. Motor insurance
Also known as fleet insurance, this is a legal
requirement for companies that own and use any type of
Legally, you need to cover your business vehicles on a
third-party basis, but you should consider taking out a fully
comprehensive policy so that your own vehicles are also covered in
the event of accidental damage, vandalism or theft.
2. Professional Indemnity insurance
If your business offers professional services in fields such as
accountancy, finance and law, you are legally
required to take out Professional Indemnity (PI)
insurance. This protects your business should any clients or third
parties make claims against you on the basis of bad advice or
Businesses that do not offer these services specifically, but do
sell expertise, advice or skills in some form, often take
out professional indemnity insurance because they know that one
costly claim has the potential to leave them bankrupt.
3. Directors and Officers (D&O) liability insurance
This type of insurance protects company directors and other
senior executives in the event of negligence, default, breach of
duty or breach of trust claimed by a third party. In the event of
any claims made to this effect - which could be mischievous and
completely unfounded - the business may face significant legal
expenses. These expenses may also be compounded by any financial
settlement that needs to be made as a result of the claim.
Young, entrepreneurial companies may be particularly susceptible
to employment-related disputes because they do not tend to focus on
risk management strategies while they are in the midst of
developing and launching exciting new products and services. Other
types of businesses that are vulnerable to employment-related
claims are partnerships and family firms.
A D&O policy also provides financial cover that stops the
senior individual's personal assets, such as their home, car and
savings, from being placed at risk in these circumstances.
Read more about D&O insurance
How can I buy or switch my business insurance with Make It
Make It Cheaper offers a free, impartial service that sources
prices from a range of insurers and helps you find the right
commercial insurance policy to suit your business needs. You can
read more about the key features and benefits of our service here.
Call us today on
0800 970 0077 and a business insurance expert will talk you through
your no-obligation quote.