Beginners' guide to business insurance

Learn more about the basics of business insurance, including cover for premises and contents, public and employers' liability, and more.

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Key points

  • Depending on the nature of your business, some insurance elements may be legal requirements
  • Other business insurance options could protect your firm and help keep it running
  • Policies and providers differ enormously - as with any insurance, shop around to get the right deal at the right price

Time, care, passion and resource have all been poured into your business, and now you need to protect all that hard work.

To make sure your business is safe, learn how to choose the right business insurance policy.

Why do I need business insurance?

Business insurance is a general term which covers the variety of policies that are available, or may be a legal requirement, for your company. These include:

  • Business premises insurance, also known as commercial buildings insurance
  • Business assets insurance, also known as business contents insurance
  • Public liability insurance
  • Employers' liability insurance
  • Professional indemnity insurance
  • Other specialist policies

Depending on your business type and needs, you'll require a selection of the above policies to complement and protect your firm.Beginners' guide to business insurance

Check the terms and conditions of any policy before taking it out to make sure that what you think is included is actually covered under the policy.

Business premises insurance

If you have premises then a business premises insurance policy could protect your commercial buildings against a range of risks, including fire, storm damage, explosion and flooding.

The level of cover available will vary between policies, so it's important to check that what you expect to be covered is included.

Some policies may include cover for accidental damage as standard, but check beforehand.

If your landlord is responsible for insuring the premises and your lease complies with the Code for Leasing Business Premises in England and Wales 2007 then the insurance should be fair, reasonable and represent value for money

As with standard home insurance, to get the right business premises insurance you should insure the building for the full rebuild cost.

If you're a tenant, then your landlord will be responsible for insuring the premises, unless the business has a shop front.

In this case, obtaining suitable cover is the responsibility of the tenant.

If your landlord is responsible for insuring the premises and your lease complies with the Code for Leasing Business Premises in England and Wales 2007 then the insurance should be fair, reasonable and represent value for money.

You have the right to request details of any commission received by your landlord and the details of the relevant insurance policies relating to the premises.

Business contents insurance

Business contents insurance isn't a legal requirement, but it may be advisable, especially if your business relies on expensive equipment.

Before deciding the level of cover to purchase, you should consider your business needs and what you want to get out of the policy.

You'll be able to choose between new-for-old cover or indemnity insurance.Public liability insurance

The former will meet the full cost of replacing items if they're stolen or destroyed, while the latter will deduct the cost of wear and tear so that you're returned to the same position as you were prior to the loss.

Public liability insurance

If your business has any contact with a third party - ie members of the public - it could benefit from public liability insurance, which could protect it in the event a member of the public is injured or their property damaged because of the business.

Employers' liability insurance

A legal requirement, employers' liability insurance protects your employees and your business in the event that someone is injured or becomes ill as a result of their work.

Professional indemnity insurance

If you offer professional advice and expertise to other businesses, you may need professional indemnity insurance.

Did you know...?

  • If you haven't told your home insurer that you're using your home as a place of work, your policy could be declared invalid

This could protect you if a client believes you've been negligent and have therefore cost them time and money.

Specialist business insurance

As the nature of businesses vary, so does the nature of the insurance they need.

Whether you're a builder who has expensive tools or a removal service that needs to protect the goods it moves, specialist business insurance should be able to provide you with the right kind of cover for your needs.

Working from home

If you operate your business from home, your standard home insurance policy may not be sufficient to protect your business needs.

If you haven't told your home insurer that you're using your home as a place of work, your policy could be declared invalid.

How are business insurance premiums calculated?

When taking out business insurance, your provider will likely ask you a number of questions relating to your business and its practices.

If you need both employee liability insurance and public liability insurance, a joint policy could prove cheaper

These are likely to include:

  • What type of business you are
  • The size of turnover
  • The number of employees
  • What kind of claims you've been subject to in the past
  • Your health and safety record
  • Your level of exposure to customers/clients

All these questions can determine the level of risk your business presents to an insurer.

If your business has been subject to claims in the past, then its risk may be determined to be higher and an insurer may increase the premium, making cover more expensive.

Similarly, if your health and safety record is less than squeaky clean, you could find your insurance cost increased.

Things to considerBriefcase and files

Think about combining different types of business insurance policies.

For example, if you need both employee liability insurance and public liability insurance, a joint policy could prove cheaper and more convenient than arranging each policy separately.

When you compare business insurance, remember that the right policy isn't necessarily the cheapest.

If you search with Gocompare.com, you'll have the option to purchase online and/or speak to a specialist in a UK-based call centre if you need further guidance.

By Emily Bater