In Britain, we’re given plenty of opportunities and support to set up our own businesses. Small businesses are the backbone of the country, from the sole traders who provide invaluable services such as plumbing, the traditional high street stalwarts such as newsagents and cafes to the innovative tech companies that grow year on year.
As we move out of the business challenges of the pandemic, commercial enterprises are once again finding their feet and working hard to succeed in a challenging economic environment. Commercial business insurance can’t protect business owners from the economy, but it can help guard against a range of common risks associated with all businesses.
In this article, you’ll find out exactly what business insurance is and why it can play an essential role in companies of all sizes. You’ll discover the scenarios where you might need it and the different types of covers that address the potential losses associated with running a business. Then you’ll think about how to find the best policy for your commercial enterprise, considering the factors that affect the cost of your premium.
What is Commercial Business Insurance?
Commercial insurance – also known as business insurance – represents a collection of covers that help protect all aspects of your business. The benefit of this type of policy is that you can tailor it to meet your business’s specific and unique needs.
Though many of the included covers apply to any business, no two companies are alike. For example, a self-employed dog walker may need a different package of covers than a large construction firm, and a café’s needs will vary from a courier firm’s.
If you offer a professional service, you could benefit from bringing all the cover you need under one umbrella policy – commercial business insurance.
Why Do You Need Business Insurance?
Commercial insurance will shoulder the financial burden when incidents out of your control lead to losses. Whatever the size of a business, a large compensation claim, the theft of vehicles or stock, or damage to business premises could represent a financial crisis from which the company cannot recover.
Typical scenarios where you might need to use this type of insurance are:
- Third-party personal injuries
- Accidental damage to a third party’s personal property
- Claims for illness or injury made by employees
- Claims that advice you gave or work you carried out caused a client or customer to lose money or sustain harm
- Loss, theft or damage of contents, stock, equipment, tools or vehicles
- Damage to your business premises
- Loss of income due to an accident you’ve had
What is Covered?
Most insurance for business policies have three core covers:
If a member of the public makes a claim against your business for personal injury, you’ll use public liability to cover the costs of defending the claim legally. If you have to pay compensation, this will also be covered. For example, if a customer trips on a loose tile in a restaurant and injures themselves, without public liability insurance, the owner would be liable to pay out all costs and expenses.
Public liability is also used if a member of the public’s personal property is damaged on your premises or during the course of your business activities. If someone visiting a hotel rips their expensive coat on a nail protruding from their bedroom doorway, or if an employee visits a client’s office and spills coffee over their expensive laptop, the business owner can turn to public liability to deal with the cost of a repair or replacement of the damaged property.
Professional Indemnity Insurance
A different type of claim made against your business by a client involves accusations that your business caused them financial losses or reputational damage because of negligent advice or services you provided. You could have such a claim made against your business even if you didn’t charge for the advice or service you provided.
For example, a jeweller may have advised a customer regarding the cleaning of an antique ring. If the customer followed that advice and found that the recommended cleaning products damaged their ring, they could claim for the cost of repairs or a replacement, citing professional negligence on the jeweller’s part. Or, if a personal trainer showed their client how to perform specific exercises at home and these led to an injury, a claim could be made.
Consultants and businesses that work with other companies offering advice and strategies may mainly rely on the safety net of professional indemnity cover.
Businesses can also use professional indemnity to deal with claims for breach of confidentiality (for example, sharing information without consent or using a trademark or copyright without permission) and acts of defamation (such as slanderous comments made about a client).
In the UK, businesses that employ staff must hold at least £5 million in employer’s liability cover. This cover will be used should an employee claim that they were injured or became ill as a direct result of working within your business.
Even if an employee no longer works for you, they can still make a claim for illness or injury if they can prove it is attributable to their time under your employment.
Even small businesses that employ just one member of staff will require this cover, with the only exception being if employees are direct family members.
How to Choose the Right Policy
A good insurer will learn all about your business operations before creating your commercial business insurance policy. The right policy not only contains the most relevant covers, but it also has those covers sitting at the appropriate level. Something to be aware of when building your commercial insurance package is to avoid cover overlap – where you insure the same risk twice. An experienced insurer will help you avoid this, avoiding unnecessary expenditure.
The type of questions a specialist insurer will ask you to help formulate the best insurance strategy include the following:
- Does your business involve members of the public?
- Do you own or lease business premises?
- How many people do you employ, or are you the sole worker within the company?
- Do you use vehicles for your business?
- What does your company do – provide a service or a product?
- Do you hold stock?
- Does your business use equipment or tools?
We’ve already discussed the three core covers found in business insurance policies, but there may be other covers you’d like to add to make the policy work well for your company. Additional useful covers often brought in to augment commercial insurance are:
Personal Accident Cover
As a business owner, finding yourself unable to work due to an accident can weigh heavy on your mind, especially if you fulfil many critical roles within the company. Personal accident cover can offer financial assistance if the worst happens, helping to keep your business afloat until you’re ready to return to work.
Many different kinds of businesses can benefit from product liability insurance. These include companies that design, manufacture or repair products, sell products, install products, and provide products on their premises or for clients or customers to take home with them (such as food packaging and disposable cutlery).
You can use this cover if someone is injured, falls ill or damages their property due to a defective product your business makes, works on or with, or supplies.
If your business handles data, cyber insurance can be a valuable addition to your commercial business insurance. From booking systems in a hotel to the IT used by programmers, being able to protect your software and the valuable information stored is helpful.
You can use this insurance should your IT systems suffer a cyber-attack or if a data breach occurs.
How Much Will It Cost?
The cost of a commercial insurance policy can represent a significant outlay for a small business. Although it can ultimately serve as a crucial financial crutch, you should carefully consider the types of cover you take out and the levels you set. A good insurer will help you strike the right balance of sufficient protection within your budget.
The final cost of your premium will depend on the number of covers you take out and how much cover you choose in each case. High levels of public and product liability cover will naturally be more expensive than the base levels set for a small, low-risk business. Likewise, the greater the assets you need to cover and the higher the number of employees, the more it will cost.
High-risk businesses will pay more for their premiums, but generally, a company should be able to afford good coverage and may be able to spread the cost monthly.
You can bring down the cost of your insurance by paying as high of an excess as you can afford. Furthermore, savings can be made if you haven’t made previous claims within your business. If you have business premises and vehicles are a crucial component of your company, taking steps to enhance security will help to bring down your premium.
Demonstrating that you provide your employees with good health and safety train can illustrate that your business is at lower risk of incidents. If you can provide evidence of solid accounts, risk assessment and quality control procedures, your insurer will see that you’re running a reliable business that mitigates its risks.
When renewing your insurance, always chat with your insurer to update them on any changes made within your business. Much can happen in a year, and though the departure of a few employees and a drop in the number of work vehicles may not seem very relevant, they could reduce your insurance premium.
Do I have to Take Out Business Insurance?
It is not a legal requirement in the UK for companies to take out commercial business insurance, but doing so can make good financial sense. It also allows business owners to combine different elements of cover under one umbrella policy – allowing you to keep track of all your insurance matters.
Remember, though you don’t need to take out insurance by law if you have employees, employer’s liability is a legal requirement in the UK.
Do I Need Commercial Insurance for an Online Business?
If you conduct all your business activities online, though you’d still benefit from commercial insurance, there are some aspects of cover that you might not need. For example, if you work from home (and as long as your home insurer knows you work from home), you won’t need business buildings and contents cover.
You may enjoy a lower premium if your work is considered low-risk. However, you’re still wise to consider how cover such as product liability and professional indemnity may relate to your work.
It’s an excellent idea to talk to a specialist insurer who understands an online business’s unique needs and can ensure you aren’t paying for cover for risks that don’t apply to your company.
Can I Take Out Business Insurance Before I Register a New Business?
If you’re setting up a new business, nothing is stopping you from taking out insurance, even in the early stages of its development. As soon as you start investing your time and money into a business, it’s worth protecting.
You can take out insurance before you start training, and even if your business needs to be registered, your insurance company will not need sight of this before providing you with cover.
The best way to protect your business is to seek commercial insurance through a trusted company like Park Insurance. We’ve been working with the country’s small businesses for decades and know how to assess your risks, whatever industry you work within. Communication is key; we’ll find out all about your business so that no stone is left unturned when it comes to offering your comprehensive but competitive insurance cover.