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Simple Guide to Business Insurance for Small Businesses

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Last editedJun 20212 min read

The goal of business insurance is to protect an individual against any losses that may occur through running their business. Often, these come in the form of compensation claims but there are many different forms of insurance to choose that are important to a business. Having the correct policy in place can avoid expensive pay-outs if things go pear-shaped, so it is important to understand the ‘ins and outs’.  

Business insurance UK

As a UK business, you can buy policies directly by searching for the best business insurance quotes online or through a broker. Brokers can specialise in small business insurance and tend to get you a better deal if your business is the right fit. However, you must always shop around as there are often good deals to be found online  if you do your research.

How much is business insurance?

It is difficult to give an accurate estimate about how much your specific insurance needs will cost. Packages vary wildly depending on the nature of your business and the level of cover you need. Factors such as whether you’re looking for small business insurance, specialised insurance or need to insure a company with 1,000+ employees will result in different premiums.

The best way to get an idea is to look at the average cost of business insurance in the UK. In 2021, it was around £118 a year just for public liability cover. The cost of employers’ liability insurance (required by law if you hire any employees) will set you back £60 - £210 on average, per employee.

Types of business insurance

  • Public liability insurance – Any small business that interacts with the public needs this to protect against damage or injury claims from third parties.

  • Employers’ liability insurance – This is a legal requirement if you hire anyone even on a part-time or temporary basis. This covers legal defence costs and compensation payments if an employee is injured as a result of their work.

  • Professional indemnity insurance – This covers legal defence costs and compensation if a client suffers a financial loss due to negligent professional advice.

  • Cyber insurance – This provides financial protection against cyber crimes and breaches of data.

  • Car insurance – If your business involves driving clients, i.e., estate agents, then you might need to change your car insurance policy to include business use as well as social use.

  • Personal accident insurance – This provides financial compensation if someone has an accident that results in a serious injury or death in the workplace.

  • Business interruption insurance – This form of insurance covers loss of income due to a physical interruption to business activities such as fire or flood.

Business interruption insurance and COVID

For many business owners, the last 18 months have not been smooth sailing. Naturally, due to the impact of COVID-19, a lot of businesses have experienced disruption. It would be natural to assume that your business interruption insurance policy would cover you, but this may not be the case. This type of insurance will provide compensation for damage caused by a fire, for example, but it may not cover consequential loss (i.e., indirect losses).

The key difference when it comes to business interruption insurance and COVID is that COVID is regarded as an unforeseen external event causing consequential loss, which may not be covered. However the wording of your policy is key. If your policy features the following wording, or similar, you may be covered: ‘losses caused by government (or other public authority) restrictions resulting from an occurrence of a notifiable human disease’. 

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