Compare business insurance

What is business insurance?

Accidents can happen and any business runs the risk of losing its reputation, cash flow and ability to survive if disaster strikes. Business insurance is a bit of a catch-all term for policies that are designed to protect your business financially against potential risks. Below are examples of some of the most common. You can get business insurance that covers one, several or all of these risks (and more).

Types of risks that businesses take

• Injuring someone. Someone slips in your retail shop and sues you for medical bills.
• Damaging property. You own a car wash and one of your employees spills a chemical inside a customer’s car.
• Selling faulty products. You accidentally sell computer software with a flaw that opens up customers’ computers to viruses and further damage.
• Giving incorrect advice. As an architect, you provide a client with a flawed building design that needs repairs after it’s built.
• Financial mismanagement. Your company breaches safety or industry regulations and has to pay fines.
• Accidents outside your control. Your business faces a theft, fire, storm, damage or other disaster.

How does business insurance work?

Exactly how your policy works will depend on the nature of your business and the type of cover you’ve bought; there’s no one-size-fits-all policy. A sole trader plumber, for example, will need very different types and levels of cover compared to a firm of computer maintenance specialists.

You can choose to take out individual types of cover separately (from the same insurer or different providers) or a combined business insurance policy that covers multiple risks.

Some business insurance policies are specifically targeted at certain types of business. For example, cover for tradespeople might focus on (for example) business van insurance, tools cover and public liability cover (if customers or other third parties are injured in the course of your work).

What type of business insurance might I need?

The specific type (or types) of business insurance you need will depend on the type of work you do and the size of your company. Below, we’ve outlined the risks that different types of businesses may face and how business insurance can help.

What do I need in order to get business insurance?

To get a quote for business insurance, you’ll need to give the insurer a number of details about you and the business. These may include:

• Your business address
• The nature of your business
• The number of employees
• Actual or projected turnover
• When your company was set up and how long it’s been trading
• How your company is set up (for example, are you a sole trader or a limited company)
• Any history of claims
• The level of cover you want
• Whether you’ve had any county court judgements (CCJs) or Individual Voluntary Arrangements (IVAs)

Is business insurance a legal requirement?

This depends on the nature of your business and how it is set up. Some types of business insurance are a legal requirement for certain businesses. For example:

• If your business employs any staff that aren’t direct family members, you legally need employers’ liability insurance.
• Firms that operate in regulated industries may be required to take out professional indemnity insurance. These might include accountants, architects, financial advisers and solicitors.

In addition, some contracts for your services may stipulate that you must have certain types of insurance. For example, self-employed journalists may be required to take out professional indemnity insurance that covers the risk of libel claims. Or a cleaning company that operates in public spaces may be required to take out public liability insurance.

If you’re setting up a business, always check what kind of insurance you might be legally or contractually obliged to take out. Ask the trade bodies or regulators for your industry and check contract terms carefully.

What level of business cover do I need?

This will depend on the type and size of your business, plus any legal, regulatory or contractual requirements. As you’d expect, the bigger the company and/or the higher the risks, the more cover you’re likely to need. Think about potential losses and how much it could cost to put a mistake right.

The minimum level of employers’ liability cover required by law is £5 million, though you can choose to take out more if you feel your risks and potential liabilities warrant it.

Meanwhile, some contracts for services may stipulate a minimum level of cover they expect a supplier to have. And some professional bodies specify minimum levels of professional indemnity insurance for their members.

How much does business insurance cost?

Like most insurance quotes, it depends on circumstances. The amount you pay for coverage depends on the type and size of business you’re running, how many people you employ and what risks you run.

If you’re a sole trader or are running a light team of 4 or 5 librarians, your insurance will cost less than if you have 50 architects planning homes across the country.

How do I compare quotes for business insurance?

Unlike many types of consumer insurance, such as car insurance or travel insurance, comparing quotes often isn’t simply a case of using a price comparison site. Rather than working directly with insurers, many price comparison sites partner with an online broker, such as Simply Business. Online brokers can be a good starting point, as they compare quotes from a range of direct business insurance brands. But it’s probably also a good idea to check directly with a few business insurers, including those that don’t work with brokers (such as Direct Line for Business).

When you’re gathering quotes, make sure you compare like for like as much as possible. Don’t just opt for the cheapest possible deal as it may not be fit for purpose. Think in advance about what risks your business needs protecting against. As well as making sure these risks are covered by the policy (or policies) you choose, look at things like cover limits plus any extras that are included or optional. Once you’ve got a shortlist of policies you’re happy with, then you can narrow it down further based on price.

How can I reduce the cost of business insurance?

It’s important not to cut costs by skimping on cover, as this could leave you high and dry if disaster strikes. But there are tactics you can use to keep costs to a minimum.

• Shop around. This basic principle applies equally to business insurance as to car, home, travel or gadget insurance.
• Don’t automatically renew. Just because a certain provider offered the best deal last year, doesn’t mean it will do when you come to renew.
• Bundle up. Combining multiple types of business insurance into a single policy is likely to be cheaper than taking out several policies (though this isn’t always the case, so it could be worth doing a quick comparison if you have the time).
• Lower your liability risk. Some insurers may offer discounts if you reduce your risk, by installing an alarm or security cameras on your premises, or giving employees health and safety training.
• Demonstrate that your business is well run. If you can show evidence of this, through risk assessments, professional accreditations or external audits, for example, insurers may be willing to charge you less.
• Consider getting insurance through your trade or professional organisation. Some offer good deals for members that may be cheaper than those available elsewhere. Don’t automatically assume this is the case though; do your own comparisons.

How do I make a business insurance claim?

Most insurers will let you make a claim online or over the phone, though the process can vary between providers. In most cases, you will need to supply proof of ownership or legal responsibility and as many details as you can about your claim.

What other insurance does a business need?

As well as the main types of business insurance policy outlined above, depending on the nature of your business you might also want to consider the following. These can be bought individually, or can sometimes be bundled together with your main business insurance policy.

• Commercial buildings and contents insurance. Commercial property insurance can protect your work premises plus any possessions and equipment held there if they’re damaged or lost as a result of fire, flood or theft.
• Landlord insurance. If you run a business renting out your properties, landlord insurance can protect you against damage to your property plus, potentially, loss of earnings due to not being able to rent out your property for a certain period.
• Business vehicle insurance. If you use a car or van for your work, you’ll need business vehicle insurance; regular car or van insurance is unlikely to cover business use.
• Business interruption cover. This insurance covers you if something prevents you from trading.
• Credit risk insurance. Covers you for losses if a customer refuses or is unable to pay their debt to you.

Bottom line

Business insurance is an important, and sometimes essential, weapon to add to your business arsenal. Think of it as the shield that protects you, allowing you to enter the business fray with the confidence that you’ve got a safeguard against possible assaults. But there are lots of different elements of business insurance, so before you buy, take a step back to think about what you really need. If in doubt, the trade or professional body for your industry may be able to help. And, as always, shop around for the best deal, when you first take out insurance and every time you renew.

Frequently asked questions

• Is employers' liability insurance compulsory?

  If you employ anyone in Great Britain that isn’t a member of your family, then yes, employers’ liability insurance is a legal requirement. This has been the case since the Employers’ Liability (Compulsory Insurance) Act 1969 was put in place. It requires businesses with employees to take out at least £5 million worth of insurance to cover the cost of compensation if an employee is injured or becomes ill as a result of their work. If you don’t have appropriate cover, you could be fined £2,500 for every day you aren’t properly insured.

• Is professional indemnity insurance compulsory?

  Unlike employers’ liability insurance, there is no law that requires businesses to have professional indemnity insurance. However, regardless of the law, it is mandatory for members of some professional bodies and those that operate in certain regulated industries, such as solicitors, accountants and some healthcare professionals. And some business customers may require service providers to have professional indemnity insurance as part of their contract of work.

• Is public liability insurance compulsory?

  There is no law or regulatory requirement for businesses to have public liability insurance. But some customers may stipulate in their contracts that any service provider that interacts with members of the public have this insurance. If this is the case, and you don’t have the right insurance, you risk being in breach of contract (and not getting paid). And, quite apart from that, if your work brings you into contact with members of the public (as would apply with many tradespeople, for example), it’s a good idea to have this insurance to protect you against injury claims if a passer-by trips over your ladder, for example.

• What types of small business can you insure?

  If you have less than 50 employees and an annual turnover of less than €10 million, your business is officially defined as “small” according to the UK government. Whether you have 49 employees or just yourself, and regardless of how you’re set up (a limited company or a sole trader, for example), there will be a level of business insurance that works for you. You can either buy specific types of business insurance based on what your company needs, or look for a package that’s targeted at your type of company. You’ll probably be able to find insurance deals tailored towards tradespeople, restaurants or hairdressers, for example.

• How much does it cost to insure a small business?

  As is almost universally true of insurance, there’s no hard and fast rule for this. Even if you only opt for the bare minimum level of cover (so, employers’ liability insurance if you have any full-time, part-time or temporary employees, or professional indemnity insurance if you work in some regulated industries), the cost will vary depending on the nature and size of your business and the insurer you choose. Tree surgeons, for example, are likely to need to pay more for employers’ liability cover than a law firm because of the increased physical risk. Adding optional (but often important) extra cover, such as public liability or cover for tools and equipment, will increase costs. The key thing, as always, is to shop around and compare quotes.

• Do I need business insurance if I'm self-employed?

  Potentially, yes. At a minimum, you’ll legally need employers’ liability insurance if you employ anyone outside of your direct family, even on a temporary basis. Even some sole traders may be obliged to get some forms of business insurance. For example, if you’re engaged in a regulated activity (such as offering financial advice or accountancy services), you are likely to need professional indemnity insurance. And, regardless of legal obligations, as a self-employed person you’re vulnerable to business risks. So, you may choose to get more cover than you legally need to protect yourself financially if disaster strikes.

• Do I need business insurance for an online business?

  It depends on the nature of your business. If you have one or more employees, you’ll almost certainly need employers’ liability insurance. Even if you have no physical interaction with customers or the public, you may also choose to take out cover that protects your stock and equipment, or – for example – product liability insurance in case a product you manufacture or sell causes injury or illness.

• Can I get business insurance before registering my business?

  Yes. The provider is unlikely to ask you for registration details. Most will be happy to insure you before you officially start operating your business.

• Will business insurance cover me for theft?

  It probably can, with the right cover, but you’ll need to specify what types of theft you want to cover. For example, do you want to cover the tools of your trade (computer equipment stolen from your home, or decorating supplies stolen from your van, say), or the stock on display if you run a shop?

• Will business insurance cover me for lost revenue?

  It depends on the type of cover you have and what’s causing your drop in business. Risks such as an economic recession where demand for your product or services may fall or a close competitor infiltrating your market are not covered by business insurance. But business interruption insurance can cover revenue lost after an unpredictable disaster like a fire or flood. This means that while the business is being repaired, cash will be provided to account for the loss of revenue (but not for personal income).

  Check to make sure that the limit in your policy is high enough to cover your business if it shuts down for an extended period of time. Building fires and floods can shut a business down for months or even years.

• Can I still get business insurance if I've had CCJs or IVAs?

  It could be trickier, though not necessarily impossible. Every provider considers county court judgements (CCJs) and Individual Voluntary Arrangements (IVAs) differently. While some will outright reject you, others may be willing to consider covering you. They might charge more for the privilege, though. If you struggle with more mainstream providers, it’s worth investigating brokers that specialise in insuring business owners that have had bad debts or bankruptcy issues.

Written by

Ceri Stanaway

Writer

Ceri Stanaway is a researcher, writer and editor with more than 15 years’ experience, including a long stint at independent publisher Which?. She’s helped people find the best products and services, and avoid the pitfalls, across topics ranging from broadband to insurance. Outside of work, you can often find her sampling the fares in local cafes. See full bio