What types of business insurance do I need?

Like all other types of insurance, business insurance exists to protect a business from potential financial loss. Whether you’re self-employed, running a small business or large company, business insurance is designed to cover unexpected costs you, perhaps, otherwise couldn’t afford.

To figure out if you need business insurance, ask yourself, "could I afford the cost of a claim against my business?"

There is no one-size-fits-all number for the cost of a claim against your business. Minor injury claims could leave you liable for a four-figure payout, while breaching the GDPR could cost your business up to £17.5 million.

In this guide, we'll run through the following covers and questions to ask yourself when considering whether they're right for you.

1. Public liability insurance
2. Product liability insurance
3. Employers' liability insurance
4. Business contents insurance
5. Professional indemnity insurance
6. Cyber insurance
7. Directors' and officers' insurance

Public liability insurance

Unless you never come into contact with anyone else while working, you’ll probably want to consider public liability insurance. It’s designed to protect your business against claims arising from injury or damage from anyone who isn't an employee.

Ask yourself: is my business customer-facing?

• Yes: If your business deals with members of the public (anyone who isn’t an employee — so this includes contractors and suppliers), public liability insurance is worth considering.
• No: Even if your business isn’t customer-facing, you’ll likely interact with people at least some of the time. For example, during client visits, or off-site work. What’s more, if you’re entering into a supplier contract in the public sector, a minimum level of £5 million public liability is often required.

Product liability insurance

Whatever role your business plays in the product lifecycle, it's impossible to have complete control over what happens once it's in the hands of a customer. If something does go wrong, you could face a claim for injury or damage caused by your product. Product liability is designed to protect your business against claims connected to these risks.

Ask yourself: does my business sell products?

• Yes: If your business sells products — whether as the manufacturer, supplier or retailer — you may want to consider product liability cover. It’s a common misconception that if you’re a retailer or a supplier, defects or injuries caused by the products are the manufacturer’s problem. It’s not that simple. Even if you’re the supplier or the retailer, you could find yourself liable for any claims against a product you’ve supplied a customer, even if you technically didn’t cause the issue.
• No: If your business doesn’t give away or sell products at all, you may not need to consider product liability cover. However, think about whether you could be liable for damage or injury caused by something as innocuous as a gift or swag that you’ve sent to a client.

Employers' liability insurance

If you have staff, employers' liability insurance is usually a legal requirement in the UK. Not having it in place could result in a £2,500 fine for every day you don't have it.

Ask yourself: does my business have employees?

• Yes: If your business employs anyone, whether full or part-time, temporary or apprentices, employers' liability insurance is usually a legal requirement. Some companies with employees may be exempt, for example, businesses that employ only close family members. But it's important to check your status to ensure you’re operating legally.
• No: You don’t need employers' liability insurance.

Business contents insurance

Business contents insurance is similar to home contents insurance, but for business contents and equipment. This includes furniture, tech, specialist equipment, documents and cash. Among other things, it can cover damage to your contents and equipment caused by:

• Fire
• Flooding
• Malicious damage
• Storm damage
• Forcible theft

At Superscript, the business contents insurance we offer can cover your equipment if you’re travelling internationally temporarily.

If you only need cover for portable equipment, you might want to consider business equipment insurance. Similarly, if you’re a tradesperson relying on specialist tools — from hammers to power tools — you might want to take a look at tools insurance.

Ask yourself: does my business depend on expensive equipment?

• Yes: If your business depends on equipment that would be expensive or unaffordable to replace, you might want to consider business contents insurance.
• No: Much like home contents insurance, it’s not a legal requirement but it’s easy to underestimate how much it’d cost to replace things. A good way of understanding your risks is to draw up an itinerary to assess how much replacements might cost.

Professional indemnity insurance

Professional indemnity insurance is designed to cover claims against you or your business if a client suffers a financial loss as a result of your professional services. Professional indemnity insurance covers a range of industries, from trades to financial professionals.

Ask yourself: is my business paid to offer a service?

• Yes: We all make mistakes, but any advice that turns out to be ill-advised or a service that results in financial loss to your client could result in them suing you. You don’t even need to be paid for your advice for a claim to be made against you. So you may want to consider professional indemnity.
• No: You may not need professional indemnity cover. However, it’s worth bearing in mind that even if your business doesn’t offer advice or a service, professional indemnity insurance can cover accidental trademark infringement. For example, if you accidentally posted an image that belongs to somebody else on social media.

Cyber insurance

Cyber insurance is designed to cover any business that operates online or stores and handles data.

Even if you correctly implement every computer security recommendation, the impact of an unexpected server outage or a cyber-attack could be potentially devastating to your business — and isn’t necessarily just a matter of a one-off cost.

A data breach could have longer-term implications on your reputation, for example. So in this situation, you could benefit from the support offered by cyber cover, which can include the help of forensics, PR and legal teams who understand how to deal with cyber crises.

Ask yourself: does my business use computers or store, process or control customer data?

• Yes: Then cyber insurance is a cover you should consider. All computer systems connected to the internet are vulnerable to cyber-attacks. Also, any data you hold is subject to the GDPR, which, if breached, can leave you open to severe penalties from the Information Commissioner’s Office (up to £17.5 million or 4% of annual turnover — whichever is higher).
• No: Most businesses these days have some sort of online presence, whether a social media profile or website. It’s also likely you’re storing your customers' personal details — name, contact information and payment details — somewhere digital.

Directors' and officers' insurance

Also known as management liability insurance, and D&O for short, directors' and officers' insurance covers your directors or management team against claims from employees, the public, regulators, investors or other directors. D&O can cover fines, penalties and legal expenses for everything from allegations of mismanagement to claims of bad behaviour, including digitally.

In some cases, directors can be held personally liable. This means your own assets — like your savings or your home — can be used to settle claims.

Ask yourself: do I have a management team?

• Yes: Usually, a partnership or limited company includes people with management responsibilities. An error in a pitch deck or financial reporting, for example, could land your management in hot water. As with all business insurance, it’s important to assess the risks your business faces.
• No: Unless you’re a sole trader, you might want to consider D&O cover.

Except for employers' liability insurance which is mandatory for most businesses with employees, business insurance is not a legal requirement in the UK. As a business owner, however, it might be prudent to consider how much an unexpected claim against your company could cost and how your business would be able to cope.

Also, some trade associations and partnerships may require you to hold certain levels of cover. And for professional services firms, professional indemnity insurance can also often be a contractual requirement.

Here are some examples. If you’re:

• Renting office or shop space, your landlord will usually require you to have public liability cover, at a minimum
• Competing for contracts with public sector companies or working with other businesses, certain covers may be required as a prerequisite
• Looking to join a trade association or professional organisation, they may ask you to have a certain level of cover

The cost of business insurance depends on the cover and limits you select for your business.

When considering business insurance, focus on getting the right combination and level of cover to suit your company’s risks. The cheapest cover may seem like a good economic decision in the short-term, but if you’re not covered for what you need, it could bite back later if you need to make a claim and find that it doesn’t offer sufficient cover.

Always read your quote and policy documents carefully to understand the full details around exclusions, terms and limits of your cover.

It can help to start by identifying each risk your business faces, and then asking yourself some high-level questions, like:

1. What would happen if something went wrong — like a customer claim, cyber attack or flood — and I wasn’t covered?

Thinking through the worst-case scenarios could help pinpoint the kind of cover that could be beneficial to your situation.

2. Who do I work with, and could they hold me legally or financially responsible if something went wrong?

This includes clients, customers, suppliers, landlords and employees. If there’s any risk of blame, there might be a policy to back you up.

3. What’s the stuff I rely on every day to run my business, and how would I cope if it were damaged, lost or stolen?

This includes your gear, gadgets, premises or data — if any of it disappeared overnight, could you keep going?

4. Are there any legal requirements for my business, industry or team?

Some covers aren’t optional for most businesses — like employers’ liability if you’ve got staff. Others might be needed to land contracts or meet industry rules.

Based on this very basic assessment, you may decide that the cost of business insurance is worth it for a risk that could potentially cost your business time and money.