Most small businesses carry insurance that is required by law, as well as other forms of insurance that, while they are not required, are seen as being necessary to protect the business.
There are essentially two forms of insurance that you may be required to carry by law. The first is Employer’s Liability Insurance, which is required if you employ people to work in your business; and the second is Third Party Motor Insurance, which is required if you operate vehicles within your business.
Employer’s Liability Insurance must cover you for at least £5 million, and is designed to protect you should an employee be injured and seek compensation from your business. Here, the term employee applies to anybody working in your business, whether as someone doing it on a full-time basis, or simply as a student undertaking a work placement. Failure to carry Employer’s Liability Insurance can result in your business being fined up to £2,500 for every day you operate without cover.
Third Party Motor Insurance, which is designed to cover you when an employee driving a vehicle belonging to the business is involved in an accident, must cover you for at least £1 million of property damage, and provide you with an unlimited amount in the case of personal injury. Most small businesses will extend their vehicle cover to also protect them against fire and theft, and many will choose to take fully comprehensive cover, including cover for such things as the cost of repair to, or replacement of, the vehicle if necessary.
In private life we are used to protecting ourselves, and our property, and throughout our lives we will purchase many different forms of insurance from life and health insurance, to car insurance, home and household effects insurance, life insurance, and indeed many other forms of insurance. We do this simply because living carries risks and, without insurance, we could find ourselves in severe financial difficulty. A business too faces many risks and, as a result, business owners should consider at least 4 types of additional business insurance protection, over and above those required by law.
1. Protection against being sued. Businesses have a responsibility to both their customers and members of the general public, and many of these responsibilities are protected in law. For example, if a member of the public visiting your premises is injured, as the result of negligence on the part of one of your employees, you could find yourself facing considerable legal costs, and possibly having to pay out a very significant sum in compensation.
2. Protection of your business premises. Just as you will insure your own home, and its contents, against damage from such things as fire, flood and burglary, so too you should also protect your business premises in the same way (landlord insurance for example). In addition, however, you should also insure yourself to cover losses arising from the interruption of your business, should your premises be damaged and be out of commission for a period of time.
3. Protection for your employees. For most businesses the workforce is a very valuable asset and, in many cases, is indeed the most valuable asset. It makes sense therefore you protect yourself against losses arising from such things as the illness or death of an employee. Here there are various insurance products from Keyman Insurance, to cover specific and exceptionally valuable members of your workforce, to group health insurance, to protect the workforce as a whole, and get them back to work quickly in the event of illness.
4. Protection to cover financial risk. Most businesses run financial risks that vary widely according to the nature of the business, but which could seriously affect the business if they were not covered. These risks might include such things as a major customer failing to settle his account with you, or an employee stealing from the business.
Insurance needs will clearly vary from one business to the next, but there can be very few small businesses today that will not suffer, in many cases severely, if they are not carrying to cope with a range of different risks.