When you become self-employed, you’ll need to think about what new insurance you’ll need for your business.
What Business Insurance Will You Need?
There are lots of different kinds of business insurance on offer. So, when you become self-employed, you should check to find which cover you need and what type of policy is best for your business.
Running a business from home
If you run your business from your home you shouldn’t assume that your personal household insurance will cover you, even though nine out of ten home insurance policies will cover business equipment in your home. Typically, cover will depend on the use of the home being for clerical purposes only (i.e. office work). But you will not be covered if you have any visitors to do with your business (e.g. client visits). If you’re setting up your business from home, the best thing to do first is to talk to your current insurer and explain your plans. They may ask for an additional premium on your current insurance. If you don’t tell your insurers and you need to make a claim you might find that your insurance is invalid and that the claim won’t be paid.
Other types of business insurance you might need
Here are a range of insurance needs you might have to consider for your business. A number of insurers offer business insurance policies which provide cover for a number of risks that you and your business may face. However, you should shop around to get quotes, and you might consider using a specialist business broker. Motor insurance – if your business uses vehicles, you must make sure that your policy includes cover for business use. This also includes any private policies where an employee is driving their own vehicle in connection with your business. If you are unsure, get them to check with their insurer to confirm that business use is included. Professional indemnity insurance – if you’re a professional who gives certain types of advice or services to your clients, then you should have professional indemnity insurance. It pays out if you are negligent or make a mistake which causes your client to suffer a financial loss. The types of business that use this kind of insurance include accountants, solicitors, architects, doctors, journalists, business consultants, engineers, financial advisers and many more. If you are not sure whether you need professional indemnity cover, you can contact your trade association or professional body, or an insurance broker for advice. Employers’ liability insurance cover – if you employ people then you must have insurance cover to pay compensation to employees injured while doing their jobs. This is a legal requirement.
Buildings and contents insurance – this will protect you from loss if your premises and its contents are affected by fire, flood, theft and other damage. The right level of cover will depend on whether you own or lease your premises as well as the value of your buildings and their contents. Equipment insurance – the kit and machinery you use for your business can be insured for the cost of replacing them or their current value, taking wear and tear into account. You can also get policies to protect machinery and IT equipment against breakdown. This could be worth thinking about for all your equipment, or even just the key equipment that you wouldn’t be able to work without. Tradesmen’s tools can also sometimes be added to another liability insurance product so it is worth asking if this is possible if you have public liability insurance. Public liability insurance pays out in the event of a mistake by any of your business activities which causes injury or damage to a customer or member of the public. Typical examples will be from a member of the public tripping and being injured because of a spill on a shop floor that isn’t marked with a warning sign. You’re more likely to need this if people visit your premises, eg if you run a shop. For a few businesses like horse riding stables, it is a legal requirement. Customers may want to see proof of adequate insurance before they’ll do business with you. Product liability insurance – if goods you’ve made, sold or repaired either hurt or kill someone, or damage someone’s property, then you may have to pay compensation. You could be held liable for the damage or injury caused by defects in your products’ design or manufacture even if you haven’t been negligent. If your business is in a particularly high-risk sector such as food and drink, the toy or electrical industry, then you should give serious consideration to this. Product liability cover is often included with public liability insurance. Goods-in-transit insurance – if you have goods or stock you send around the country, you might want to think about protecting them in case they are lost or damaged while being transported. It usually covers road or rail and can often extend to inland or coastal waters. International transit by sea or air needs to be insured separately. Credit insurance covers you against the risk of your customers not paying you because they go bust or because they don’t pay in time. You can tailor the cover to suit your needs – to cover the whole of your turnover or just that of key customers. You can also protect yourself against the risk of not being paid by overseas customers. However, you’ll still have to carry some of the risk yourself – so the insurance might cover you for 80% and you will have to bear the remaining 20%. If you are exporting large-value goods (£10,000 or more) you might be able to get government help with Export Insurance. Key person insurance – (sometimes also called Key man insurance) covers the business up to an agreed limit for any financial losses that would result from the sudden death or illness of a crucial member of the company – including the owner or manager. People who could be covered include the director, a key sales person, a vital project manager, or someone with specific skills or knowledge which is valuable to the company. Legal expenses insurance – covers the costs of defending a legal action such as solicitors’ fees and court costs. Typically, this cover includes employment disputes, property protection and contract disputes. Business interruption or business continuity insurance – this will cover you for the costs incurred and loss of profits if you are hit by a disaster like a flood or fire. Travel insurance – you will need to make sure you or your employees are covered if they travel abroad. You can provide cover with a business travel insurance policy, or alternatively, check with the insurer of your personal travel policy if they provide cover when on a business trip.