The New Business Guide To Business Insurance

by constructaquote - 2 February 2017

Whether you’re setting up a new business or simply getting everything in good working order for your current business, it’s important to consider business insurance.

In the event of a claim being made against you, taking the time to find the right cover for your business can provide peace of mind.  Meeting the right criteria and selecting the right cover means that you can rest easy knowing that everything can be taken care of without facing the unnecessary stresses of an expensive claim and the potentially damaging effects on your business.

If you fail to get the right insurance and someone makes a claim against you, whether it’s an employee, customer or third party, without insurance you will be liable to pay for legal costs and any compensation due, which could leave your business in debt, you out of pocket, and a bad reputation. You may even have to close your business completely.

To avoid that, this guide will take a look at the different insurance policies available for businesses in order to understand which policies are the most appropriate.

1. Public Liability Insurance

Why is Public Liability Insurance important?

Public Liability insurance if often considered as one of the most essential forms of business cover. It provides businesses with protection against property damage claims made by third parties, as well as financial protection against personal injury compensation claims.

If someone makes a claim against you and you have public liability insurance, the policy you have chosen can assist with handling the claim, pay compensation and legal fees due.

Examples of when public liability is needed –

• If you’re a painter and you accidentally spill paint all over a customer’s carpet, they can claim the cost of the damage from your public liability insurance policy.
• If you’re a shop owner and the floor is wet after being cleaned and a customer slips and breaks their leg, they can claim compensation from your public liability insurance policy.

Do I need Public Liability Insurance?

• Public liability insurance is not legally compulsory for all businesses in the UK. It is, however, deemed essential because if someone makes a claim against you, your policy could cover compensation claims, property damage costs and legal fees incurred. Public liability is advisable for businesses that regularly come in contact with members of the public or their property.

What Happens If I Don’t Have Public Liability Insurance?

If you choose not to get public liability and someone makes a claim against you, you will be responsible for paying the claimant any compensation due or costs for any property damage caused. You may also need to pay for a solicitor to represent you and any of your legal fees and the claimants’ legal fees if they win their case.

A public liability insurance policy not only takes the financial strain off your business, it also prevents a large amount of stress associated with dealing with claims.

The cost of a claim will be substantially more than the price of a policy premium.

How Much Does Public Liability Insurance Cost?

The cost of your public liability policy will depend on a number of things including the level of cover your business needs and level of risk involved with your business. Typically, businesses may choose to take out public liability insurance between £2 – £5 million; however, at constructaquote.com we are able to offer customers indemnity limits up to £10 million.

For more information on public liability, check out our FREE Ultimate Guide here.

2. Employers’ Liability Insurance

Why is Employers’ Liability Insurance important?

Employers’ liability protects you, the business owner, from compensation claims made against you by your employees. The policy covers claims made by the employee regarding negligence, injury or illness sustained through their work for you, on or off site. It also covers current employees and previous employees.

If an employee makes a claim against you and you have employers’ liability insurance, the policy you have chosen can assist with handling the claim, pay compensation and any legal fees. .

Examples of when employers’ liability is needed –

• An employee is burnt or electrocuted whilst working for you and they allege they have not been properly trained to use the equipment responsible for the injury.
• An employee contracts a respiratory disease due to working with hazardous materials and alleges the correct personal protection equipment; (PPE) was not supplied.

Do I need Employers’ Liability Insurance?

For any businesses that employ staff, Employers’ liability is mandatory in the UK… Almost all SME’s and those who are self- employed who have full-time, part-time or sub-contracted employees will need to have employers’ liability insurance.

If you are self-employed and do not have any employees working for you, you do not need to have employers’ liability insurance but  may still want to consider  Professional Indemnity and Public Liability Insurance.

What Happens If I Don’t Have Employers’ Liability Insurance?

The Employers’ Liability (Compulsory Insurance) Act 1969 is enforced by the Health and Safety Executive (HSE).

HSE inspectors are legally allowed to look into whether you have a valid employers’ liability insurance policy in place. They can also check whether it has been obtained by an approved insurance supplier and that you have cover to the legal minimum level. They can ask to see your certificate of insurance at any time.

If your business employs staff and you do not have employer’s liability you can be sentenced, on summary conviction in the Magistrates’ Court, to a fine of up to level 4 on the standard scale (£2,500).

 How Much Does Employers’ Liability Cost?

Employers’ liability insurance is not usually a standalone product. Typically, it is sold in conjunction with public liability insurance, with both policies working hand-in-hand to protect your business, its employees and the people it serves.

Your cover will depend on the number of employees you have and the level of risk within your business. You are legally required to have a minimum insurance cover of £5 million.

For more information on employers’ liability, check out our FREE Ultimate Guide here. 

3. Professional Indemnity Insurance

Why is Professional Indemnity Insurance important?

Professional Indemnity insurance is cover to provide you with financial protection against third party claims. If your business provides professional advice or design services for which your customers depend on, professional indemnity insurance could protect you in the event of a claim made against you.

If a claim is made against you and you have professional indemnity insurance, the policy you have chosen can assist with handling the claim, pay compensation and legal fees due. .

Examples of when professional indemnity is needed –

• If you’re a business consultant that advises your client to make significant changes within their business that subsequently leaves them with no customers and money, they could make a claim against you.
• If you’re a builder or design contractor that makes a mistake that results in your client suffering a financial loss, injury or even death as a consequence of your error, a claim could be made against you.

Do I need Professional Indemnity Insurance?

Some financial professions, such as accountants, legally cannot operate without professional indemnity insurance. Some professions are also required to have a professional indemnity policy in place as a condition of being a trade association member.

Roles that provide professional advice or design services such as architects, surveyors, builders, IT consultants, business consultants, accountants etc., may want to seriously consider professional indemnity insurance.

Although you aim to provide the best service and results, sometimes things can go wrong and you may accidentally provide the wrong advice or make a mistake, resulting in your client suffering a financial loss.

What Happens If I Don’t Have Professional Indemnity Insurance?

If you do not have a professional indemnity policy and someone makes a successful claim against you, you will be required to pay any compensation due to the claimant as well as any legal fees as a result of their claim.

The cost of claims can easily reach hundreds of thousands of pounds, if not millions.

How Much Does Professional Indemnity Cost?

The cost of your policy depends on the level of cover your business needs. This is based on a number of factors including the level of financial risk your business operates on. At constructaquote.com we offer limits of indemnity online from £50,000 up to £2 million; however, as a specialist in small business policies if you speak to one of our dedicated insurance agents they are also able to quote above £2million offline.

For more information on professional indemnity, check out our FREE Ultimate Guide here.

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