Although businesses may differ in terms of products and services, the one thing they all have in common is the need for appropriate insurance coverage. Business insurance is different from personal lines inasmuch as you're not only covering property and equipment; you are also covering workers, customers, your inventory, and a lot more.
If you are a business owner, would it surprise you to consult with an insurance expert only to find out you're carrying inadequate coverage? If so, you wouldn't be alone. More than one UK business owner is inadequately covered because they don’t know what they have, or need. This is partly the responsibility of the business owner and partly that of the insurance provider.
Business Liability Cover
It is hard to peg one particular component of business insurance as being more important than another. However, if we had to pick, we would choose liability cover as the most important. Without adequate insurance, your liability in terms of product safety or quality of service could end up costing you your entire business.
Business liability insurance covers business owners under several different scenarios depending on the type of business we are talking about:
- On Site Accidents - Sometimes referred to as "slip and fall” or public liability insurance, cover for on-site accidents protects business owners from financial loss should a customer, vendor, or other non-employee injure themselves in an accident on business premises. As the name suggests it covers against things like slips and falls resulting in injury as well and have most other types of on-premises accidents.
- Product Safety - The idea of product safety applies to manufacturers, distributors, and retailers. Liability for product safety lies in the fact that consumers have a reasonable expectation of safety when purchasing any product at the retail level. If property damage or injuries arise from the use of any product, those involved with the manufacture and sale at any level can be held liable.
- Off-Site Property Damage - Companies in the services sector are especially vulnerable to off-site property damage issues if they provide goods or services away from their office or retail location. One example might be a window cleaner who accidentally breaks the window of a client while working at a house. Accidents and negligence are usually part of this type of insurance cover.
The type of liability cover you need will be determined, in part, by the type of business you run. For instance, if you are operating a permanently fixed restaurant in the heart of London then you won't need to worry about off-site accidents and property damage unless you are involved in catering services. Likewise, if you are a painter working out of your van, you would not need to worry about on- premises accidents.
Bespoke Insurance for Businesses
In researching the topic of business insurance, we wanted to know what a standard cover looks like for the typical UK business. We found out that there's really no such thing. Business owners really only have two basic options to choose from, combined coverage (fully comprehensive) and bespoke cover.
Bespoke insurance for business is the more common of the two, and with good reason. There are so many differences between various business sectors, and also between various players in any given sector, but it's difficult to come up with blanket coverage that meets the needs of every business owner. It is more common for a business owner to sit down with a broker or insurance agent and customise their policy accordingly.
Using bars and pubs as an example, a business owner may pick and choose among dozens of different offerings including:
- employer liability - covers workplace accidents and injuries to employees
- public liability - covers claims from customers, vendors, and the general public
- legal expense cover - pays for legal bills resulting from court cases
- buildings cover - protects business premises whether owned or leased
- business interruption cover - provides for lost income in the event circumstances prevent the bar or pub from conducting business as usual
We have listed just five possible covers here; there are literally dozens of other possibilities. If we were to go through the various components of other business sectors, we would see even more options. The fact is that business insurance usually must be custom tailored to a particular business for maximum protection.
Combined Coverage Insurance
Combined coverage business insurance is typically a more comprehensive policy dealing with a pre-packaged set of covers most common to a specific business sector. Less expensive combined coverage options would provide only the most common types of cover to protect against the most common types of claims.
Using our bar and pub as an example again, a basic combined coverage plan would most likely include public and employer liability, buildings cover, and personal accident cover. This would adequately protect the business owner under most circumstances while still remaining affordable.
A more comprehensive combined coverage insurance policy might also throw in "extras" such as a business interruption, money cover, goods in transit, and theft cover.
Insuring Commercial Vehicles
Companies using dedicated vehicles as part of conducting their day-to-day business can insure them through either a comprehensive business policy or an individual vehicle insurance policy. Both have their advantages and disadvantages.
For large fleets it is usually more advantageous to include all of the vehicles in a comprehensive business insurance cover. This would be the most likely option for large corporations with extensive fleets. Covering vehicles this way works to the advantage of the business because they receive a cheaper price by volume. It's not beneficial to a small business because it is too costly.
Smaller businesses with just one or two vehicles would do better with a separate cover. If company vehicles are cars or vans under a certain weight limit, basic commercial auto insurance is typically all that's needed. This cover would only apply to expenses incurred as the result of a traffic accident; liability cover would take care of anything else.
Business Insurance for Landlords
Landlords and real estate developers have some unique insurance needs not seen in other sectors. For example, a landlord specializing in residential properties must cover them self against legal action from tenants through their liability insurance. They must also cover buildings and grounds in the event of fires, weather-related disasters, and accidents caused by non-tenants.
Landlords will sometimes take out other types of insurance such as boiler cover to take care of problems with heating systems. Landlords have so many little details to look after that it requires quite a bit of insurance to keep them adequately covered.
From the perspective of tenant, the one thing to remember is that a landlord's business insurance does not protect the tenant or his property. If a tenant wanted insurance cover, they would need to purchase their own renters insurance in whatever amount they deemed appropriate. Landlords are not responsible for personal possessions or any liability issues that arise from the tenant's actions.
Minimum Legal Requirements
Every business operating in the UK must carry at least a minimum amount of insurance. The first is product liability. As discussed earlier, product liability is designed to pay for property damage or personal injury your product causes to someone else. By "your product,” the law refers to any product you manufacture, sell, or repair.
The next type of insurance legally required is employer liability. This cover must be obtained as soon as you have even a single worker on your payroll. It pays for accidents resulting in injury to your workers. Public liability is the third type of insurance required by law.
According to Find.co.uk it is becoming increasingly more common for UK businesses to take out professional indemnity insurance as well. This type of cover now being offered here is largely due to the influence of America and Canada, where enormous lawsuits against businesses for even the most minor issues are quite common.
Professional indemnity, in a generic sense, provides protection against bad choices or negligence of workers. For example, if a car repair shop gave a consumer bad advice and was subsequently sued, professional indemnity would pay any award ordered by the court. Professional indemnity covers most workers and self-employed individuals.
Know Your Business Insurance Now
In 2007, northern England suffered some of the most severe flooding ever recorded in that part of the country. Thousands of businesses filed insurance claims only to find out their policies did not provide them adequate coverage. In the New York and New Jersey, the same scenario played out this past December (2012).
Your business is a significant investment of time and money on your part; do not put it at risk by purchasing inadequate insurance cover. The time to know exactly what your policy provides is now, before there's a claim, so that you are not caught off guard. Take the time to review your insurance with an expert who can advise you as to whether or not it is adequate.
Business insurance is a legal requirement in the UK. Yet it is also one of the biggest decisions a business owner will ever have to make. Finding adequate insurance that does not break the bank is a far better wiser choice than just choosing the first policy that comes along and moving on.
Your search for business insurance can get under way soon as you are ready. Here are some direct links to insurance companies and brokers ready and willing to find you the appropriate business insurance you need:
Hiscox - Hiscox is a business insurance specialist offering several levels of cover for small, medium, and large businesses. They currently cover more than 110,000 small businesses across the UK.
Quote Line Direct - An online brokerage offering business insurance from some of the biggest names in UK insurance. They specialize in combined coverage, retail insurance, and commercial trades.
More Than Business - As an arm of the RSA group, More Than Business seeks to go above and beyond traditional business insurance products to provide what other insurance companies can't. Right now residential landlords can save 30% online.
Swinton Commercial - You may already recognise the Swinton name for other financial services, but their commercial division also provides broker services for business insurance. Swinton Commercial has an extensive network of local brokers all across the country.
Allianz - Provides a large number of financial services on an international scale. For business insurance, they offer products that can be custom tailored for almost any business regardless of size and sector.
Endsleigh Business - The commercial arm of Endsleigh; a UK insurance broker offering a wide variety of products. In terms of business insurance, they specialize in bespoke cover.
Financial services comparison websites are a great place to get multiple quotes by filling out one form. Here are some links to well-known UK comparison sites:
Go Compare - Provides quotes from companies like Zurich and AXA. You can quote and buy online or connect with a business insurance specialist.
Money Supermarket - Offers business insurance quotes through its partner, Simply Business. In addition to online quotes, they provide a phone number you can call to speak to a representative.
Confused.com - Compare business insurance quotes to cover more than 500 different types of businesses. You can purchase online for instant cover.
Compare the Market - Get quotes for public liability, landlord insurance, and more. This site breaks down insurance types according to business sectors.
Tesco Compare - Tesco also partners with Simply Business to offer you multiple business insurance quotes online. The link on the Tesco site takes you directly to Simply Business.
Money.co.uk - This site compares prices for more than 70 business insurance products in an easy-to-understand manner. They work with companies like Direct Line and QuoteZone.