As is true in most aspects of life – running a startup business comes with some risks. There are some risks that no insurance company will cover, particularly those that relate to business decisions – however, there are plenty of risks that go well beyond an impact that’s just felt in yours and shareholder’s pockets.
Whether it’s injury to a third party on your premises, legal claims from customers or even the implications of tax investigations – there are insurance products to cover you. We’ll give an overview of some of the most popular products and options…
Public liability insurance
If a member of the public is injured – or has some of their property damaged and you or one of your employees is at fault, then public liability insurance would protect you against having to settle with the injured party.
Although people tend to assume public liability only covers people who are visiting your own premises, it actually covers a lot of different situations. For example:
- A customer in your shop knocks over some cleaning equipment that is not being stored correctly, ruining their clothing and causing a minor injury.
- A client visiting your offices trips on some unsecured wiring and falls, injuring themselves.
- A technical consultant from your company damages some of your client’s computer equipment while on a service visit, the bill runs to thousands of pounds.
- An apprentice in your plumbing company causes a water leak that damages the walls of the company premises you’re working on – and that of the business below it.
The potential impact of each of these events differs – but could very well include legal costs, the claimant’s legal costs (if you are found to be at fault), loss of earnings (both current and future) and also any damages deemed necessary.
Do you need it?
It is not a legal requirement that you have public liability insurance – but considering the scope of potential claims that could be brought against you – it’s certainly likely to be a good idea. While it’s important to get professional financial advice – as a first step it’s worth considering what situations you and your staff are likely to find yourselves in.
It’s also worth noting that some landlords require you to have public liability insurance to comply with the terms of rental agreements – so check carefully.
Employer’s liability insurance
Should something untoward happen to an employee while they’re working for you, an employer’s liability insurance policy is what would cover the cost of any claim against you or your business.
Most commonly this type of cover would protect against minor injury and cases of where there is dispute over employment law – however, it can and does also protect against more serious instances, such as employee death.
It’s a legal requirement that you have this type of cover in place – although the nature of the cover means there are some instances where exceptions are made:
- Limited companies who have only a sole employee do not need employer’s liability insurance – assuming that person owns at least half the company shares.
- People who are registered as being self-employed and employ only themselves or family members also do not need employer’s liability insurance.
Do you need it?
Be sure to check with the health and safety executive if you think either of the above situations apply to you – if they don’t, then the answer is a resounding yes!
The health and safety executive enforce the requirement for employer’s liability insurance – taking the task very seriously and levying large fines on companies who attempt to duck out of the responsibility. Without it, you’re leaving your company open to these fines, the costs of legal proceedings (both yours and the claimants) – plus any damages and/or compensation.
Professional indemnity insurance
This kind of policy covers you against claims that a brought relating to the professional service you provide – essentially if it is inadequate, or has led to your client losing money. Here are some examples of how PI insurance works:
- A plastics company agrees to create a number of components for a car manufacturer. The products are delivered on time but have been incorrectly moulded, meaning the manufacture of the cars is delayed and customer order times extended – in turn leading to cancelled orders and reputation damage.
- A print company delivers banners intended to decorate a large new-build housing estate. After a few days of poor weather, it becomes apparent that the banners are tearing and the print is running, leaving the client stuck with poor quality banners – or the cost of having them removed and replaced.
- An IT company sign a service level agreement with a client – but fail to honour that agreement, leaving systems without backup. When the client’s main storage server fails, customer data is inaccessible, causing major service disruption.
Do you need it?
A lot of professional accreditations, regardless of your field, will require you to have professional indemnity insurance as part of their requirements – if you’re not sure, check with them directly. Even if your profession doesn’t require it, without it you could face enormous legal fees and compensation payments – think about it carefully and consult with an accredited insurance advisor about your particular circumstances.
Other types of insurance policy
Although we’ve listed the main three types of business insurance – there are others you might want to seek advice around:
Property and contents insurance – covering building and contents owned by your company – sometimes a prerequisite if you’re renting furnished office space.
Tax investigation insurance – If HMRC ever investigate your company finances this type of cover can pay for expenses, miscalculations and even tax shortfalls – depending on the cover you choose.
Directors insurance – Applying to your directors and managers, this type of policy will cover costs arising from compensation claims relating to alleged wrongful acts, including breaches of duty and trust, professional error and neglect and other business-related acts.
Company vehicle insurance – motor policies that cover the use to company owned or leased vehicles when being used by employees.
There’s no substitute for professional advice
This guide is intended to inform you about the types of products that exist and the types of companies that might use them. To be certain whether your company requires any of the cover noted above, you should contact a regulated insurance advisor and discuss your company’s unique circumstances.