If you have just started a small limited company or you’re revving up as a sole trader, you may be wondering if business insurance is really a necessity. Some types of insurance are mandatory for business, but it’s often a valuable line of defence, too.
When is insurance essential?
While recommended for everyone, the only type of business insurance which is mandatory in the UK is Employers’ Liability insurance. This is required if you employ people in your business, whether on a permanent or casual basis.
Employer’s Liability is designed to provide cover for employees if they have an accident at work, or if they suffer from a work-related illness. It can also cover any compensation payments and/or legal costs you’ll need to pay out if the employee decides to take legal action against you.
Most businesses are required to have at least £5 million employers’ liability cover. And take note! If you don’t have this insurance but you employ someone, you could face a huge fine of up to £2,500 a day.
Other reasons why business insurance is beneficial
Whether you are legally required to have it or not, there are different types of business insurance which can protect you in a variety of situations.
Employers’ liability insurance can cover employees in the case of illness or injury, but other types of cover will offers some protection from property damage, legal fees, and beyond.
You can insure the business against the cost of legal problems
Hopefully it will never happen, but that’s basically the point of any type of insurance. Just imagine an employee or customer taking legal action against your business. Without adequate insurance you may end up footing the bill for some hefty legal fees. Having to make a huge payout could also really set the business back.
Protect your business from accidents, damage, or global events
No one can predict when a big accident or natural disaster is about to happen. Your place of business could get flooded, go on fire or could be broken into. A global event, such as SARS or COVID19, might affect the production or distribution of materials, causing obstacles for your business.
If you have no cover in these circumstances, you could very well have to rebuild your office from scratch which could put the company finances in a difficult position.
Cover yourself in the event of a cyber attack
The risk of cyber attack is a real threat for businesses, affecting their data storage and protection. If a hacker manages to break into your systems they could take with them corporate secrets or disrupt operations. The financial implications of such an attack can be huge, so having sufficient business insurance can really be a safety blanket if this occurs.
Some clients may require it
Sometimes clients and suppliers require the business they work with to have certain types of insurance before they will work with them. For example, they may want you covered by Professional Indemnity Insurance which covers you if you or your employees make a mistake leading to a client’s financial or reputation damage.
Are you covered? Let us know why, or why not!
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About The Author
An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.