Small Business Insurance

According to the Federation of Small Businesses (FSB), 5.6 million small businesses existed in the UK at the start of 2018. Small and medium-sized businesses with a workforce below 250 people are far more common than larger enterprises, comprising over 99 percent of all businesses across all sectors in 2018. Of this 99 percent, 96 percent can be officially classed as micro-businesses, employing fewer than ten people (Parliament.uk). In 2018, there were 5.4 million UK micro-businesses, and the majority of these will have taken out one or more types of business insurance, for the sake of protecting their property, capital and reputation.

Importance of Small Business Insurance

Even if employers feel that they are highly responsible and organised in running their business, unexpected issues can have a substantial impact on the future of the company. For example, if an error is made by one of your consultants, if a customer trips in your premises or if your data is accessed by a computer hacker, your company will probably have to dedicate a significant amount of time, money and energy in compensation and legal fees. If the appropriate insurance policy has been taken out, the business will be protected against these issues.

The quantity and combination of insurance policies a company takes out is at its own discretion, but businesses particularly need insurance if they rely on the expertise of one person, have invested in property, equipment or stock, or are applying for a business loan. Banks and other lenders will want to know that your company will be able to adhere to their repayment plan in the event of unforeseen circumstances.

Whether you are self-employed, work from home, in an office, trade online or in-person, you should be insured. The longevity of a business is often dependent on its ability to survive any bumps in the road. Where larger businesses might be able to overcome small issues by using their capital, it is especially hard for small businesses to recover after setbacks. For this reason, owners of small businesses must ensure that they have taken the right steps to safeguard their business in the future.

Types of Small Business Insurance

The world of insurance policies can be a confusing one, so let’s take a quick look at some of the most common insurance policies for small businesses, what they cover and which sorts of businesses should take them out.

• Buildings or business property insurance: this is self-explanatory and protects your business premises in the event of damage, such as that of a flood or fire. This insurance often also covers the breakdown of items such as boilers and fire and burglar alarms. Most small businesses should have this type of insurance.
• General liability or business liability insurance: this covers the costs incurred by ‘general’ claims involving bodily injuries or damage to property, including intellectual property. Most small businesses should have this type of insurance.
• Public liability insurance: this is often confused with general/business liability insurance, and covers the costs associated with claims from members of the public who sustain an injury or damage to their property whilst at your premises.
• Employers’ liability insurance: this type of insurance applies to your workforce, protecting the business when employees suffer from a work-related injury or illness, and must legally be taken out if your business consists of anyone besides yourself.
• Professional indemnity insurance: this will help finance the legal fees incurred by a compensation claim if incorrect information is given by one of your employees to a client, who then suffers a financial loss as a result.
• Business interruption or business income insurance: this will protect your business if it suffers a loss of income as a result of an event that means that the business cannot operate as usual. This will include floods, fires and severe injuries suffered by employees, and often covers the cost of replacing damaged or stolen equipment and the temporary relocation of the business.
• Tools insurance: this covers the cost of replacing or repairing broken or stolen tools and equipment. Business owners who take out this policy should insure their tools for their full value and keep receipts indicating that they own them.
• Cyber insurance: this type of insurance is increasingly important in the modern age and protects the business in the case of information being lost from IT systems. This is likely to result from computer hacking and should be considered if businesses process and store sensitive client or customer data, process and store payment information and banking details, or rely heavily on computer systems for day-to-day business.

Because buildings/business property insurance and general/business liability insurance is particularly relevant for most businesses, there is the option to take out both forms of insurance at once with a BOP – a Business Owner’s Policy – which is a package deal combining the two, that is designed for small businesses. Small business owners looking to take out insurance should conduct research into these to compare the best deals for them.

For franchisees, the process of insuring the business might be a little different. It could be that an insurance scheme has already been put in place by the franchisor. Franchisees often benefit from a centrally-managed insurance scheme, which offers franchisees protection from day one, affording them peace of mind and the ability to concentrate on their new business venture from the get-go.

Conclusion

Everyone knows that adequate insurance can save both individuals and businesses significant amounts of time, money and energy, should unexpected issues crop up. But insurance is also something that is overlooked or forgotten about in the initial stages of setting up a business, when business owners are focussed on short-term concerns surrounding getting the business off the ground. Therefore, those that want to see success in the long-term should be prepared to put safety measures in place so that the business can overcome any issues along the way. While this may appear to be a significant expense at first, should issues arise, the right insurance policy can safeguard the future of the business.