If you run a business (or are thinking about going into business) then one of the most important decisions you will make is deciding which insurance policies you'll need in order to protect your business.
In this article we list 9 different types of business insurance and explain how each insurance policy protects your business, whether the insurance is legally required, what types of business should consider buying it, roughly how much each insurance costs and where best to buy the cover.
1 - Public liability insurance
We have provided some basic details about public liability insurance below:
- What is public liability insurance? - A type of business insurance that can cover legal costs and compensation payments if a customer or member of the public decides to sue your business for injury or damage to property.
- Is public liability insurance legally required? - No
- Who should get public liability insurance? - Any business that has regular interaction with the general public. Examples include shop owners such as hairdressers, restauranteurs as well as service providers such as childminders and tradespeople.
- Roughly what does public liability insurance cost? - The cost can vary depending on a number of factors such as the type of job you do, the number of employees and the amount of cover required. You can also tailor the cover to your own specific business meaning you can make it more or less comprehensive depending on your needs. The average cost across all business types is around £800 per year, but smaller, low-risk businesses will pay significantly less, perhaps as low as £50-£100 per year.
- Where best to buy public liability insurance? - It is best to shop around. Try using comparison sites such as Compare The Market or Money Supermarket.
2 - Employers’ liability insurance
We have provided some basic details about employees' liability insurance below:
- What is employers' liability insurance? - A type of business insurance that can help recover legal and compensation costs that arise from employees being injured or getting ill while working for you.
- Is employers' liability insurance legally required? - Yes - fines for not having it can be as much as £2,500 for every day you are not insured
- Who should get employers' liability insurance? - Every business that has at least one employee. It is not required if you are a sole trader however you still may want to consider Income Protection insurance which we explain in more detail later. Partnerships (where the directors are equal partners and do not employ any others) are not required to take out employers' liability cover, however, they should consider partnership protection.
- Roughly what does employers' liability insurance cost? - Costs vary depending on the type of business, the amount of cover required and how many employees you have. Employers' liability insurance is often bought and combined with public liability insurance and premiums equate to around £60 per year on average.
- Where best to buy employers' liability insurance? - It is best to shop around. Most people choose to combine public liability insurance and employers' liability insurance into one plan and with the same provider as it can save around 20% on the premiums.
3 - Keyman insurance
We have provided some basic details about keyman insurance below:
- What is Keyman insurance? - A type of life insurance policy to protect against the death of a key employee within your business. The life insurance benefit can help to protect profits, cover debt and pay for the cost of replacing staff members.
- Is keyman insurance legally required? - No, but should be one of the main considerations if you run a small business and a large part of your business revenue is driven by a small number of key individuals.
- Who should get keyman insurance? - Any business that relies on an individual or a small number of individuals in order to generate revenue. Examples include insuring against the death of a top-performing salesperson, perhaps an individual with niche technical skills or perhaps the founder or figurehead of a business.
- Roughly what does keyman insurance cost? - Premiums start from around £5 per month. Check out our article 'How much does relevant life insurance cost' for more information.
- Where best to buy keyman insurance? - Speak to an independent business protection specialist who can search the whole market on your behalf. It is especially important if you are insuring more than one key person as an independent specialist can get the best premiums by speaking to every insurer on your behalf, saving you time and money. Additionally, our recommended business protection specialist* will pay up to £100 cashback when you take out a qualifying business protection policy.
4 - Shareholder/Partnership protection insurance
We have provided some basic details about shareholder and partnership protection insurance below:
- What is Shareholder protection? - Shareholder protection is a form of life insurance taken out on the lives of the shareholders within the business. The beneficiaries of the policy are the remaining shareholders and it ensures that they have the funds to purchase the shares that would otherwise pass to the deceased person's family. Shareholder protection provides a safety net and ensures a succession plan is in place for the business while also ensuring that the family of the deceased gets a guaranteed sum of money.
- Is shareholder protection legally required? - No
- Who should get shareholder protection? - Any business that has shareholders or joint partners. Without shareholder protection in place, a portion of the business could pass to a disinterested family member or one with an alternative vision which could be damaging to the business. Check out our Shareholder protection guide for more information.
- Roughly what does shareholder protection cost? - Costs vary depending on the age and health of the individual being insured as well as the type of business you run and the amount of insurance required. Smaller sums for younger shareholders could start at around £10 per month but larger sums for older shareholders could quickly rise to a few hundred pounds a month.
- Where best to buy shareholder protection? - You should speak to an independent protection specialist who is skilled at dealing with shareholder and partnership protection. Our recommended independent business protection specialist* uses its experience to provide advice on the right amount of cover as well as guidance on how to get the best cover at the best price.
5 - Income protection insurance
We have provided some basic details about income protection insurance below:
- What is income protection insurance? - An insurance policy that pays out a guaranteed income if you are unable to work due to an accident or illness.
- Is income protection insurance legally required? - No
- Who should get income protection insurance? - Think about whether your business could survive for a long period if you are ill or injured and unable to work. Any business that relies on one individual or a small number of individuals should consider income protection. If your business has large cash reserves or if the ill or injured individual can easily be replaced then income protection is less of a priority.
- Roughly what does income protection insurance cost? - Premiums start at around £5-£10 per month for smaller amounts of cover and for low-risk occupations. The cost can rise to a couple of hundred pounds per month for higher sums and riskier occupations and there are other considerations that can impact the cost such as the deferred period (the period in which you have to wait until you can claim) and also your health. A 30-year-old plumber could get an income protection policy that would pay out £1,500 per month (with a 13-week deferred period) until retirement for around £20 per month.
- Where best to buy income protection insurance? - Again, it is best to speak to a specialist independent income protection broker as they will be able to search the whole of the market for you. They will be able to provide advice as to which company offers the best cover as well as provide additional help with application forms and liaising with the insurance company on your behalf. You'll qualify for up to £100 cashback if you take out a policy, simply complete this short form* to get started.
6 - Product liability insurance
We have provided some basic details about product liability insurance below:
- What is product liability insurance? - It is an insurance policy that will help compensate anyone who has suffered an injury or financial loss resulting from a product you have supplied, designed or repaired. A key thing to remember is that even if you don't manufacture a product if it bears your company name or brand then you are liable for damages.
- Is product liability insurance legally required? - No - however you may find that while product liability insurance isn't legally required, any suppliers, manufacturers or retailers you work with may insist that you have it.
- Who should get it? - Any business that sells products or goods. While it isn't a legal requirement, you would be exposing your business to unnecessary risk by continuing to trade without it.
- Roughly what does it cost? - Again, the cost will vary depending on the product and the type of business you run. Costs are based on the amount of insurance you wish to purchase and the risk category of the product (for example, a motorbike is likely to be a more expensive product to insure than a piece of furniture)
- Where best to buy it? - Speak to a product liability insurance specialist such as Simply Business, Hiscox or Towergate Insurance
7 - Professional indemnity insurance
We have provided some basic details about professional indemnity insurance below:
- What is professional indemnity insurance? - Business insurance covers the cost of legal fees and claims against financial loss through lost sales or damaged reputation. This type of business insurance is for businesses that offer professional services to clients, such as advice, skills, expertise or knowledge.
- Is professional indemnity insurance legally required? - No, professional indemnity insurance is not a legal requirement, however it is a mandatory requirement in certain industries. Regulators and professional bodies can therefore make it compulsory in order to conduct business. For example, an independent financial adviser would need to have adequate professional indemnity insurance if they wish to carry out public practice duties.
- Who should get professional indemnity insurance? - Any business that provides a professional service to clients such as lawyers, architects and independent financial advisors. Also, businesses that handle client data or who are responsible for intellectual property should consider professional indemnity insurance.
- Roughly what does it cost? - Monthly premiums start from around £9.50 per month, however it will depend on the type of business you run and how much cover you require. Cost is often based on 'levels' or 'bands' of cover and so you should look at what is affordable for your business and select what offers the best value. For example, you may find that a policy provides £500,000 cover for £500 but there may be a policy that offers £1,000,000 cover for just £100 more.
- Where best to buy it? - Speak to a professional indemnity insurance specialist who understands the cover and who can tailor a quote specific to your business, such as Hiscox or Simply Business.
8 - Business interruption insurance
We have provided some basic details about business interruption insurance below:
- What is business interruption insurance? - A type of business insurance policy that protects your business for loss of sales and profits due to unforeseen circumstances such as a fire or flood. It can help keep your business going while you rebuild, support you back to trading and help pay your employees.
- Is business interruption insurance legally required? - No.
- Who should get business interruption insurance? - Businesses that would be severely impacted and unable to trade following an unforeseen event such as a fire, flood or theft. Business owners often mistakenly assume that building and contents insurance policies will cover them fully if they were to suffer a fire, flood or theft. While material losses should be covered, policies rarely account for long terms financial losses due to the impact that the event has on trading.
- Roughly what does business interruption insurance cost? - Costs vary depending on the size of the business and the amount of cover required. Small businesses looking for a relatively low amount of cover can buy a policy starting at around £7 per month.
- Where best to buy business interruption insurance? - Try business insurance specialists like Simply Business or Hiscox or you could try Direct Line for business.
9 - Business/commercial property insurance
We have provided some basic details about commercial property insurance below:
- What is business property insurance? - If you own a building from which a business operates then you should consider getting business buildings insurance, often referred to as commercial property insurance. It is normally split into two types of cover, 'building' cover (the property itself) and 'contents' cover (the contents within the property). Building and contents cover are usually purchased together as it is often the most cost-effective way of buying the cover.
- Is commercial property insurance legally required? - No, however, if you are taking out a mortgage on the property, your lender may insist on it.
- Who should get commercial property insurance? - Anyone who would struggle to cover the costs of damage or theft to their property or contents. Commercial property insurance should cover you for accidental damage, theft, fire, burst pipes and even for unforeseen events such as riots. Consider whether your business could survive if it suffered a catastrophic event such as a fire and how it would recover.
- Roughly what does business property insurance cost? - There is a range of covers available meaning you can tailor the cover to your business needs and make it as basic or comprehensive as you wish. Premiums start from around £10 per month but will rise depending on the size of your business and the amount of cover required.
- Where best to buy business property insurance? - Get quotes from comparison sites such as Compare the Market and Money Supermarket so that you can compare the best quotes.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. This link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article