Essential Business Insurance in the UK:
What You Need to Know

Starting a business in the UK involves numerous responsibilities, and securing the appropriate insurance is vital to safeguard your venture and comply with legal requirements. The following sections outline the types of insurance a business should consider, alongside key points to help navigate this essential area. FSB Insurance Service and other resources from Federation of Small Businesses (FSB) can assist businesses in obtaining the best coverage.

What Kind of Insurance Does a Business Need to Start in the UK?

The type of insurance a business requires largely depends on its nature and industry. If you employ anyone, even friends and family you must by law have Employers Liability Insurance, but to be properly protected you might want to go further.

Common types many businesses take our include:

• Employers’ Liability Insurance: Legally required if the business has employees, covering workplace injury or illness that’s caused by employers negligence. Visit FSB’s Employer’s Liability Guide for more information.
• Public Liability Insurance: Covers injury or property damage claims to third parties. This cover is important, even if clients do not visit the premises, as it also applies to work off-site or in public spaces. Learn more about how Public Liability Insurance protects your business.
• Professional Indemnity Insurance: Provides protection against claims of negligence or errors if a business provides professional services or advice. Explore more about the importance of this cover.
• Product Liability Insurance: Essential for businesses manufacturing or selling products, covering claims of injury or damage caused by those products. Learn more about its significance.

For tailored advice, FSB Insurance Service brokers can help ensure full coverage based on specific business needs.

Top Tips:

1. Make sure to check your contractual agreements to make sure you have all of the cover in place you’ve committed to have (for example increased limits of indemnity or cyber cover).
2. Identify the risks associated with your industry to prioritise essential insurance types.
3. Confirm whether certain insurances, such as Employers’ Liability, are legally mandated for your business.

Is Employers’ Liability Insurance Mandatory If Only Freelancers Are Employed?

Yes, employers’ liability insurance is required if a business has any employees, including apprentices and temporary workers. However, if the business works exclusively with freelancers or contractors who operate under their own insurance, this cover may not be necessary. It is crucial to confirm with an FSB Insurance Service broker to ensure compliance.

Top Tips:

1. Review contractor agreements to understand their insurance responsibilities.
2. Consult a broker to ensure compliance, as requirements may vary by employment arrangement.

How Much Should a Business Expect to Pay for Commercial Insurance?

The cost of commercial insurance varies depending on factors such as:

• Industry: Higher-risk industries, such as construction, typically incur higher premiums.
• Business Size: Larger companies or those with more employees will generally pay more.
• Coverage Type: Bundling different insurance types can reduce costs, while specialised coverage, like cyber insurance, may increase premiums.

FSB members can access expert advice to ensure they secure the best deals. For further tips on managing costs, visit FSB’s guide on setting up insurance.

Top Tips:

1. Assess coverage needs annually to avoid overpaying for unnecessary insurance.
2. Explore bundling policies for cost efficiency.

Do Businesses Need Public Liability Insurance If They Don’t Have Clients On-Site?

Public liability insurance is crucial even if clients do not visit the premises. If employees visit client sites or work in public spaces, this cover protects against potential claims for injury or property damage. An FSB Insurance Service broker can advise on the specific necessity based on individual business operations.

Top Tips:

1. Evaluate all off-site activities to determine potential liability risks.
2. Consult a broker if in doubt about the need for public liability insurance.

What’s the Difference Between Professional Indemnity and Public Liability Insurance

• Professional Indemnity Insurance: Protects against claims of negligence or professional errors, such as incorrect advice. It is vital for businesses offering consulting or other professional services. Explore more about its importance.
• Public Liability Insurance: Covers claims of injury or property damage caused by the business to third parties. Learn more about when you might need this coverage.

For more information, FSB’s website provides additional guidance on each insurance type.

Top Tips:

1. Analyse client interactions to determine if both types of insurance are necessary.
2. Reassess coverage annually to account for business changes.

Can Insurance Policies Be Combined for Multiple Businesses?

Yes, it is possible to combine insurance policies if the businesses share similar risks. However, if they operate in different sectors, separate policies may be needed to ensure adequate coverage. An FSB Insurance Service broker can help determine the best approach.

Top Tips:

1. Consolidate policies for similar businesses to reduce premiums.
2. Keep policies separate if businesses differ greatly in risk exposure.

What Is Covered Under Commercial Property Insurance?

Commercial property insurance typically covers:

• Buildings: Business premises.
• Equipment and Inventory: Tools, machinery, and stock on-site.
• Business Interruption: Covers lost income if the business is disrupted by an event like a fire or flood.

For further details on asset protection, refer to FSB guide.

Top Tips:

1. Conduct a property risk assessment to ensure sufficient coverage.
2. Regularly update your inventory to maintain accurate coverage.

What Are the Consequences of Operating a Business Without Insurance?

Operating without necessary insurance can lead to legal penalties, particularly regarding employer liability insurance. Additionally, without coverage, businesses may face significant out-of-pocket costs for legal fees and compensation. FSB Insurance Service brokers can help avoid these risks.

Top Tips:

1. Regularly review insurance requirements to avoid potential legal penalties.
2. Keep a record of insurance renewal dates to prevent lapses in coverage.

Is Cyber Insurance Necessary for Small Businesses in the UK?

With rising cyber threats, cyber insurance can benefit even small businesses. This cover addresses costs associated with data breaches, cyber-attacks, and customer claims. An FSB Insurance Service broker can assess whether this coverage is suitable.

Top Tips:

1. Conduct a cyber risk assessment to determine coverage needs.
2. Implement security measures as many insurers offer discounts for strong cybersecurity.

How to Make a Claim on a Commercial Insurance Policy

To make a claim:

• Report the Incident: Contact the insurer immediately.
• Provide Documentation: Gather evidence, such as photos and reports.
• Work With an Adjuster: An adjuster may be sent by the insurer to assess the damage.

For further guidance, visit FSB’s insurance website or speak with an FSB Insurance Service broker on 020 3883 7976 today.

Top Tips:

1. Keep incident documentation organised for efficient claim processing.
2. Communicate regularly with the insurer to streamline the claim.

Securing the right insurance is essential for protecting business assets and ensuring compliance. FSB Insurance Service offers tailored advice and guidance, and businesses are encouraged to explore FSB’s extensive insurance resources to make informed coverage choices.

This content is for general information only and is not intended to provide advice or a personal recommendation. Insurance cover is subject to the terms, conditions, and exclusions of the policy. Always consider your individual circumstances and seek professional advice before arranging insurance. External websites are not under our control and we are not responsible for their content.