Business insurance
Business insurance in the United Kingdom is available to a wide range occupations for self employed persons, limited companies, partnerships or PLCs. Many self employed persons find, that before they can commence work on a new job or at a premises, evidence of insurance is required. Likewise, it can be a bit of a challenge for owners of new business start-ups to know what type of business insurance is required by law, and what type of other optional insurance policies are available, to protect their livelihood. Most business owners are preoccupied with raising finance, setting up their premises and chasing new clients, during the first few weeks of trading. Yet one of the first tasks any Sole Trader or company director should complete during the start-up process, is to secure comprehensive Business Insurance cover, against the risks related to third parties and protecting assets of their company.
Traditionally business insurance is sold via local insurance brokers who usually have access to policies from most major high-street insurance companies and often they will have access to their own ‘schemes’ Business insurances are not aggressively marketed by online price-comparison ‘aggregators’. This is because comparing prices becomes almost impossible as there are subtle differences in the contract wordings and the questions involved to ‘rate’ a business insurance policy are more complex, it usually needs a telephone call to correctly ascertain the customers demands and needs.
In the UK, making claims against persons or organisations are actively advertised and encouraged. As a result, small business should be mindful of being sued in this ‘compensation culture’. Its essential that as a business owner, it is recognised that buying the right type of business insurance policy is important to provided adequate protection against claims – unscrupulous or otherwise. Even claims that lead to nothing still have to be defended and of course there is a cost involved in this. Shopping around will mean understanding the differences between the various types of policies available. The types of insurances can be confusing for the lay business person, who may perceive the concepts of business risk and liability, in a different light compared to an insurance broker or agent.
So ask an insurance advisor to explain the options. As the range of business activities in the economy is so vast, so the insurance industry has built up a huge range of policy wordings over decades, to cover most types of risks. often this risks have been brought about following pressure from industry groups or changes in legislation.
Most trades can find specialist policies tailored for their particular needs. This customisation and branding of business insurance policies to specific market sectors, means that rarely are two policies alike. In essence, the core policy wordings are very similar as many perils such as fires & floods and claims from the members of the public or employees can occur to any business regardless of their trade . Of course, the nature of the trade can have an effect on the likely hood of an event occurring , thus it is important for your insurance advisor to fully understand the scope of your business to ensure you are provided with the correct cover. Of course, some policy sections are optional and you will need to make a business decision based on your economic circumstances and you perception of the true risk as to whether you buy these extra covers or not.
Even when you insurance advisor has confirmed a suitable policy for you, Its important to carefully read the policy wording for any exclusions, restrictions and assumptions regarding what the policyholder must do to avoid invalidating cover. Ultimately, you have to confident you are covered, and the insurer will pay out in the event of a claim. For instance, if your shop is destroyed (whether through flooding, riots or fire), the appropriateness and comprehensiveness of your policy may mean the difference between survival and bankruptcy. In the United Kingdom, some insurances are compulsory, that is to say you have a statutory obligation to insure.
Business Employers Liability Insurance
Under the Employer’s Liability (compulsory insurance) Act 1969, any businesses which employs staff must take out an employer’s liability insurance policy. These types of policies are designed to cover against any personal injury, illness or disease and employee suffers while in the course of undertaking their employment. If your employee has been injured at work, they may feel it was your fault. They may take legal action to claim damages from your company, to compensate for financial loss and suffering. The vast majority of general business insurance policies will provide Employers Liability Insurance as standard. The statutory minimum level of cover is £5m – most policies these days provide £10 million of cover. The insurer will issue the policyholder with a certificate (which must be prominently displayed within your business premises). Its also worth remembering that expired certificates must be kept for a period of 40 years.
Third Party Motor Insurance by virtue of the Road Traffic Act is a compulsory insurance. Your business may need to procure Motor Insurance, if it provides vehicles for your employees (such ‘pool cars’, or ‘company cars’). Because of changes in taxation, the “company car fleet policy” is no longer purchased by some companies. Not only has the number of company cars reduced as employees accept a cash benefit instead, many companies prefer individuals to source their own car insurance This means the claims costs (from accidents that occur while on company business), do not push up the firms vehicle insurance renewals.
The last mandatory type of policy is Engineering Inspection Insurance. This covers inspection of certain items of plant and machinery such as lifts & boilers etc. Policies can usually be extended to include sudden and unforeseen damage and electrical or mechanical breakdown for most machinery. For instance, enterprises will need cover if they own a building which contains a lift. A faulty lift may seriously injure an employee or visiting member of the public. There are strict conditions how frequently lifts should be inspected by a qualified engineer and a report of his or her findings presented in written format to the policyholder.
Most business insurance policies include a range of fairly standard sections, so that entrepreneurs can protect themselves and their operations. An insurance broker or advisor can source a variety of relevant business schemes and explain their differences and relevancies. Most policies are tailored towards the needs of different market sectors (such as shops, offices, factories and surgeries). For white-collar sectors other covers such as professional indemnity insurance may be appropriate. Some of the main categories of business insurances covers are as follows:-
- Public Liability Insurance – any businesses that comes into physical contact with the general public risks being sued for damages. Businesses can take out a public liability insurance scheme, in the event they become legally liable to pay damages to a member of the public – to cover against any personal injury, illness or disease. A simple example would be where a member of the public calls on to your business premises and injures themselves on a item of your contents or equipment. A self employed person operating in a high risk trade such as scaffolding needs public insurance as erecting scaffolding can be quite hazardous.
- Business Assets and Equipment (Contents Insurance) – most firms need to effect insurance to protect their stock, raw materials, machinery, and any other assets. Business Contents would include computers & equipment and it is usual to insure them on a ‘replacement cost’ basis. Usually you can pick your own sum insured and this amount is listed on the schedule of insurance. In the event of a claim, equipment can be replaced on a ‘as new’ basis. One of the most common risks is theft of stock. The riots in London in 2011 of shops and businesses, provides a sharp reminder of why contents insurance is so important. Note that theft of stock by employees is not usually covered although a specialist Fidelity Guarantee contract can be obtained if you are worried about loss of money. Most policies cover damage from forcible entry. Depending upon what the contract states, some third-party assets and equipment may be covered. For instance, any items on hire (such as photocopiers), residing within the care, custody or control of the policyholder – may be covered under the assets and equipment section. In many cases when you lease an item of equipment the leasing company will want to see evidence of insurance and have their interest noted.
- Money and Personal Injury Insurance – many policies also have options for ‘money insurance’, (which usually means cash, cheques and postage stamps). This provides some peace of mind for retail-based cash businesses, that are concerned about thefts. Many small firms need to store petty cash on site, or transfer it at the end of the day, to their local high street bank. It is usually on an ‘all risks’ basis. Check any limits on how much cash is protected by the policy. The wording may define restrictions regarding safe keys and how cash is transported safely. Most wordings cover cash held on-site or at the homes of Directors or employees and in transit.
- Business Interruption – This is a very important section of a business policy wording and it is essential that an adequate sum insured is obtained usually based on the “Gross Profit” of the business, policies will find cover in situations where a peril such as a fire or a flood has occurred at the premises and the firm is being prevented from carrying on its normal everyday activities. As well as perils some other covers are often included such as denial of access, failure of public utilities and sometimes an outbreak of a notifiable illness or a death at the premises.
- Goods in Transit – this cover provides cover for any Goods in Transit that might get lost, destroyed or accidentally damaged in some way. Most retail and industrial organisations rely on timely deliveries of stock, raw materials, parts and goods by road and rail. Delivery failures can have a severe impact on sales and cash-flow. The Goods in Transit option, helps to minimise potential business losses throughout the supply chain.
- All Risks – if any specified item of the enterprise is lost, destroyed, or damaged by any accidental cause – the ‘all risks’ section of the policy will indemnify you for damage, (by payment, reinstatement, replacement or repair). All Risk items under business insurance policies are usually noted on the schedule.
- Deterioration of Stock – many restaurants, cafes and shops rely upon freezers and fridges to keep perishable stock safely chilled and frozen. Failure to meet health and safety guidelines can result in severe financial penalties. To make matters worse, when refrigeration equipment fails, foodstuffs can unexpectedly perish and have to be thrown away. The Deterioration of Stock clause of many business insurance policies, provides cover against this risk.
- Property and Buildings– businesses that own the freehold land and buildings will usually buy a stand-alone buildings insurance policy under the banner of a ‘commercial property insurance’ policy. As most businesses have to lease a premise as a tenant, this option rarely applies to them.
We hope this short introductory insurance guide to Business Insurance helps with your research, before you request an insurance quote.