Insurance for UK businesses

By Veronica Cruz

For any business, no matter how well-prepared, there is always a risk that a costly and unexpected unfortunate event could occur. This is what makes business insurance so important;  it enables businesses to minimise the damage that any unfortunate event could do to ruin future prospects.

Insuring a business, small or large, may seem complex and time-consuming. Between the insurance jargon, lengthy small print and difficult-to-compare products being sold by different providers, it’s easy to feel overwhelmed.

Is business insurance a legal requirement in the UK?

Employers’ liability insurance is the only business insurance cover which is always a legal requirement in the UK, if your business employs staff (whether full-time, part-time, temporary, unpaid or otherwise). 

Other covers aren’t necessarily a legal requirement, although depending on the industry you work in, they may be required. For example, healthcare professionals are required to carry a certain level of indemnity. 

That said, for the majority of businesses, the cost of a potential claim – incurring legal and compensation costs outweighs the comparatively low cost of business insurance. 

Key business insurance covers

Public Liability Insurance

The most popular business insurance product public liability insurance provides legal compensation and costs associated with accidental injury to members of the public, or damage to their property, due to your business’s negligence. 

For example, if you were to visit a client’s office for business purposes and accidentally spill liquid on the floor, causing someone to slip and injure themselves, public liability insurance may cover the costs of any legal proceeding and compensation owed to the injured party. 

Employers’ Liability Insurance

Employers’ liability insurance is only relevant for businesses with employees (including part-time employees, subcontractors, temporary workers or interns). It is comparable to public liability insurance in that it provides the business cover for legal and compensation costs associated with accidental injury to employees or damage to their property, due to your business’s negligence. 

For example, if an employee were to trip over an ill-placed cable and injure themselves, the business’s employers’ liability insurance may cover legal fees and compensation costs awarded to the employee. 

Directors and Officers’ Insurance

Directors and Officers’ Insurance (also known as D&O) is relevant to registered companies as opposed to sole traders. While it’s commonly mistaken that claims made personally against directors or officers of a company are covered by professional indemnity insurance, yet this is not the case. 

If a named individual is responsible for loss or damage to property that does not belong to them or the business, this policy would cover the business against any expenses incurred. It offers three angles of protection: 

  1. Cover for directors and officers for fines, penalties and legal expenses.
  2. Reimbursement to the company if it is required to pay fines, penalties or legal expenses on behalf of the director(s).
  3. The company itself, should it be named in the lawsuit. 

Professional Indemnity Insurance

Professional indemnity insurance is an important cover for businesses that work on a contractual basis, whether offering advice, consultancy or other professional services. It offers protection against legal and compensation costs in relation to your contract with clients, caused by alleged negligence on your part. This can range from accidental copyright infringement to data deletion.

For example, if you were a technical consultant working client side to deliver a third-party software integration and you failed to complete the project within the time period specified in your contract, you may be sued by the client for loss of income. Professional indemnity insurance may cover legal and compensation costs in relation to this. 

Cyber Insurance

Any business storing or working with confidential information (data) should seriously consider cyber insurance. It offers protection for the significant risks which may arise as a result of a data breach, whether accidental or malicious. It is sometimes but not always offered as part of a professional indemnity package.

If, for example, you were to install some software in a client’s computer systems, accidentally causing data deletion (and therefore the client to lose money), cyber insurance may cover legal fees and compensation costs in relation to this mistake.

Interesting Related Article: “UK insurance premiums set to rise again after latest tax hike“