Do You Need Business Insurance?

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by shieldwise

Running a business without the safety net of business insurance coverage can often lead to financial ruin. Despite this common knowledge, many aspiring entrepreneurs continue to ask this question, “Do you need business insurance?” With reports suggesting a year-on-year increase in the number of businesses registered in the UK, it is of growing significance that business owners are made aware of the benefit and value of owning business insurance. To facilitate a level of awareness, this blog article was devised to highlight the elements of business insurance that make it an essential investment for every entrepreneur.

What is business insurance?

In layman’s term, business insurance is a policy set in place to protect businesses against the financial risk of unforeseen incidents that may occur during normal business operations. Whether it is property damage or requests for compensation, business insurance policies can provide the necessary financial and legal aid to address the issue at hand.

Do you need business insurance?

As a business evolves and grows, so does the number of unforeseen events it is likely to face. To make a business more risk-averse, business insurance policies are set in place to provide protection against everyday risks, such as mistakes, property damage, and legal costs. This protection means, if a business suffers an unforeseen setback, it will receive the necessary guidance and financial support to deal with the issue quickly. Without business insurance, business owners are typically expected to pay-out-of-pocket for any costly damages or legal claims made against their company. Being placed in this scenario can often lead to a business filing for bankruptcy or closure.

However, the presence of having business insurance can also serve to increase a business’s credibility. Showcasing good insurance coverage can help a business establish an image that is trustworthy for customers and employees. Additionally, depending on the industry, some trading authorities require a certain level of insurance coverage before a business can operate.

Is it a legal requirement?

When you think about do you need business insurance, depending on the region and policy type, not all business insurance policies are mandatory by law. Unlike car insurance, only a select few policies are required by law. However, as mentioned previously, depending on the industry, a business may be required to have a certain level of cover to meet a regulatory body’s criterion.

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What type of business insurance is required by law in the UK?

In the UK, there are two insurance policies that are mandatory by law for a business to own. These are:

Employers’ Liability Insurance

By law, a business owner is responsible for the safety and wellbeing of their employees as they work. In the event an employee suffers an injury in the workplace, an employer could be made liable for the incident and face a potential fine. To address this potential outcome, employers’ liability insurance provides coverage that protects businesses against compensation claims made by employees that file a work-related injury or illness.

This policy plan covers all legal costs and compensation pay demands a business is required to adhere to if an employee sues their employer or ex-employer for a work-related accident. Any compensation pay is determined by the associated medical bill and registered loss of income caused by the incident. Due to the potentially high cost, a business can incur from an employee claim, most insurance companies offer a minimum cover of £5 million to ensure that if a policyholder is met with a potential claim, they would be able to deal with the matter without suffering heavy financial loss.

As previously mentioned, if a business operates with paid or unpaid employees, they are legally required to have employers’ liability insurance. In the event a business is caught operating without employers’ liability insurance, they could face a hefty fine of £2,500 per day, per employee, for each day they are not covered. The only exception to this legal requirement is if a business operates on an unincorporated family business structure. If a business opts to use registered family members as employees, they are not legally required to have employers’ liability cover in place.

Commercial Vehicle Insurance

Sometimes referred to as “business vehicle insurance”, commercial vehicle insurance is a policy plan that provides protection to policyholders that use a vehicle to travel to different locations, operate their business, and/or transport employees. While it is already mandatory by law for an individual to have vehicle insurance when owning or operating a vehicle, most personal vehicle insurance policies do not offer the same level of coverage as commercial vehicle cover. While business vehicle insurance protects its clients during business-related activities, personal vehicle insurance policies only provide cover for social use and commuting.

When it comes to do you need business insurance, depending on the industry, commercial vehicle insurance can be mandatory by law. Businesses that operate delivery and taxi services are required by law to have commercial vehicle insurance before they can begin trading. Though compulsory, this policy plan often provides policyholders with a lifetime repair guarantee and vehicle replacement service if the insured vehicle is severely damaged. Additionally, policyholders that keep equipment in their vehicles can expect replacement cover if the vehicle is stolen or destroyed – ideal for businesses that offer handyman services. For any start-up businesses that look to provide a service across different areas must ensure they invest in this policy type.

Liquor Liability Insurance

Common across the globe, many countries operate with strict criteria when dealing with alcohol. In the UK, businesses are required to have a legal license to sell alcohol, while customers must be over the age of 18 to purchase alcohol. Depending on the business type, it can be mandatory by law for a business owner to have some form of liquor liability cover before they can begin trading.

As the name implies, liquor liability insurance is a policy designed to protect businesses that manufacture, serve, or sell any form of alcohol. Due to the intoxicating influence of alcohol, this policy provides cover against claims of bodily injury or property damage made by an individual that became intoxicated after consuming alcohol sold by the policyholder. In the event a claim is made, the policyholder will receive financial support to cover any legal fees, settlements, and medical costs attributed to the incident.

For aspiring entrepreneurs that want to establish a bar, restaurant, brewery, or grocery business, investment in this insurance cover is a must. Regardless of size, any business that sells alcohol would do well to seek liquor liability cover to avoid the potential headache that may come with increased claims once the UK’s national lockdown is lifted. When dealing with alcohol, it is important for businesses to pray for the best and plan for the worst outcome.

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What type of business insurance is often requested by regulatory bodies?

It is not uncommon to find that some regulators and trading authorities require a business to have a certain type of insurance in order to operate. In essence, there are some insurance policies that are mandatory for specific business industries. These mandatory policies can include:

Professional indemnity Insurance

On some occasions, businesses can be prohibited from signing off any contracts or projects without having a level of professional indemnity insurance.

Typically geared to businesses that offer a service, professional indemnity insurance is a policy that provides cover against claims of professional negligence and/or mistakes made by a customer. In business, nothing possesses more gravity than the reputation a business garners from its customers. The influence of a business’s reputation can help it ascend to the top of its industry or crash into bankruptcy. To safeguard businesses from this risk, professional indemnity policies were developed to protect businesses against issues of defamation, negligence, and breaches of consumer law.

This policy is designed to provide the necessary financial support needed to cover the cost of any legal defence, compensation payments or additional costs required to deal with a customer claim. Due to the variety of business industries, most professional indemnity plans charge a premium based on the value of a business’s project and the risk of the industry. This insurance plan is crucial for businesses that gear their trade towards offering a form of service.

Public Liability Insurance

When it comes to insurance policies, it is quite common to find many trading authorities requesting some level of public liability insurance before a business can begin trading. This requirement is the result of the increased risk a business faces when operating in a public space.

Typically, as a business grows, so does the likelihood of a public claim being made against it. To address this potential risk, public liability insurance was developed to provide a business with cover against claims of injury, illness, and/or loss made by the public. Claims covered by this policy can include injury on business property, suspected food poisoning after consumption of a product, and damage to customer property. In the event a claim is made, the insurance company will provide financial support to cover the cost of any legal defence fees and compensation payments.

Though owning public liability insurance is not mandatory by law, investing in public liability insurance is a decision that serves as a safety net for a business’s growth. Additionally, depending on the business type, having commercial liability cover can serve to not only protect a business but also increase its credibility by adhering to industry requirements endorsed by key trading authorities.

Commercial Building Insurance

Whether it is a family-owned grocery store that has remained at the same place for years or a large corporation that operates in the heart of a city, a business’s property is one of its most valuable assets. To help protect this asset, many business owners look to acquiring commercial building insurance.

Sometimes referred to as “business building insurance”, this policy is designed to protect a business in the event its property suffers damage from a fire, burst water main, or burglary. Providing aid when a property damage incident occurs, this insurance plan offers financial support to cover the cost of any repairs or rebuilding. Depending on the provider, some building insurance policies offer additional perks that can include, legal cover, business interruption protection, and business contents insurance.

Though it is not a legal requirement, some regulatory bodies require a business to own commercial building insurance. Similar to employers’ liability insurance, this policy serves to showcase a level of commitment to preparing for any unforeseen events that could compromise health & safety regulations. For this reason, business owners would be wise to invest in this type of insurance for protection and increased sustainability. In cases where a business owner operates from a house with a mortgage, it is not uncommon for lenders to advocate business building insurance.

The tnswer to do you need business insurance

Short Answer: Yes

Long Answer:

Do you need business insurance? Yes, you absolutely need business insurance. As highlighted in the article there exist a sub-section of insurance policies that are mandatory by law or regulatory requirement for a business to own. Depending on the business industry, these insurance policies can determine whether a business can trade or exist in the UK.  If you want to employ workers to help your business expand, you will need to invest in employers’ liability insurance. If you want to run your own delivery service, you will need commercial vehicle coverage. If you have ambitions to own your own bar or nightclub, you will need to have a liquor license and liability cover.

Even if there are no compulsory insurance policies for your business venture, it is always worth considering investing in a policy anyway. Having insurance is a crucial safety net that can cover you against mistakes, accidents, theft, damage, compensation, and legal fees. Finding a suitable policy can be the difference between getting back up on your feet or filing for bankruptcy when an incident occurs.

Finding business insurance

With the vast number of insurance providers offering similar plans at different prices, it can prove both difficult and time-consuming to find an affordable insurance provider without the use of a comparison site. The use of a comparison site can help a business owner sift through thousands of insurance policies to find the one that is suitable for them. 

If you are unsure about what comparison website to use, we at ShieldWise have you covered. With an ethos to provide an exceptional platform that helps our customers find the right insurance provider, we offer a comparison service that instantly locates affordable insurance plans that meet your demands.

Here at ShieldWise, we help you save money, time, and your sanity.

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Categories: Business Insurance