Insurance is one of the most important expenses your business might incur, yet it is often the most misunderstood. Every business is different and as such each individual business’ insurance needs will vary accordingly.
This guide (along with part 2, published next week) should help to cover the basics, giving you the right knowledge to make sure that you’re buying the right insurance for your business.
Whether you are a tradesman working on your own, a boutique shop with a few employees, or an international organisation, we think you will find something useful in this guide to business insurance.
Public Liability Insurance
Public liability insurance is probably the most purchased business insurance and is essential for any business which interacts with the general public or meets their clients face-to-face. It is there to compensate a member of the public should you or an employee accidentally injure them or damage their property.
A good example would be a window cleaner who is cleaning a two storey window on a busy high street and drops his bucket on someone or something, causing damage or injury. Or perhaps a plumber leaves a piece of pipe lying around in their client’s home whilst they pop out to get some lunch and the client slips on it and injures themselves.
Unfortunately we live in a world where fraudulent claims are not unheard of. If there is a claim against you of this nature your insurer will still protect you against it in the same way, so you aren’t spending money on legal costs just because you’ve been targeted in this way. If you ever receive a claim which you believe is fraudulent, please make sure you notify your insurance broker immediately as the sooner it can be investigated the better.
In fact, you should notify your insurance broker as soon as an incident has occurred, whether you believe it will lead to a claim or not and even if you suspect it isn’t a ‘legitimate’ incident. The sooner your insurance broker has the information, the better job they can do of protecting you.
How much public liability insurance should I buy?
A range of cover levels are available, commonly starting from £1 million. With certain business types such as shops, this will often start at £2 million. In some cases you may find a contract requires you to hold £5 million or even £10 million – this is often the case if you are working on a local council or government contract.
If you don’t have a contract specifying an amount, you will need to assess your own risk and level of exposure to the public. Perhaps you have a small jewellery shop with a low number of customers every day, but all your customers are celebrities – you should probably consider how much it could cost should a celebrity trip over in your shop and miss a concert performance.
Conversely, you may be running an online shop, selling goods without a shop premises. Perhaps you see a customer once a month who is coming to collect something rather than pay the postage. In this case, your Public Liability needs may be lower – although in this case you will most likely need to consider Products Liability.
Products Liability insurance
Products Liability provides the same type of insurance as public liability, in that it covers you for injury caused to a member of the public or damage to their property – the difference is that it covers damage caused by a product that has been supplied, installed, maintained, or manufactured by you.
It is important to note that this is not the same as a warranty cover – this insurance is not covering you if the product you sold stops working or doesn’t work as it was supposed to. Products liability covers you should your product cause damage or injure someone.
For instance, an online shop may make and sell battery powered toys. Because of bad wiring in the toys, they overheat and catch fire. In this case, the Products Liability cover would be there to provide compensation should a fire cause damage or injury. Many insurers combine Products and Public Liability insurance into a single product.
Employers’ liability is the only business insurance cover required by law. It provides insurance for employees who are taken sick, or who have an accident, whilst working for you. For Employers’ Liability you need to check to see if anyone you have working for you are considered “employees” as defined in the Employers’ Liability (Compulsory Insurance) Act 1969.
As with all insurance, every case is different, but there are substantial fines if you are found to not have Employers’ Liability when you should – so always err on the side of caution when considering whether someone working for you qualifies as an employee or not. Check the HSE handout here http://www.hse.gov.uk/pubns/hse40.pdf
If you are required to buy Employers’ Liability, the law requires you to be insured for at least £5 million, although many insurers offer a minimum cover of £10 million. You are required to display a certificate of the insurance where your employees can see it (printed or online).