What insurance does a small business need? (2024)

When you’ve already got loads on your plate, organising your business insurance can seem pretty daunting. But, as you’re probably aware, insurance is one of those things that you really do have to tick off your ‘to do’ list, to ensure you’re protected against unforeseen risks, while avoiding any nasty fines in the process.

And luckily, it’s not as complicated as it might initially seem. We’ve created this short and speedy guide to give you the lowdown on the insurance you must have as a small business, and those policies you should seriously consider. So, you can focus on what you do best.

Policies you must have as a small business

There’s only one policy you’re legally required to have as a small business, and that’s employers’ liability insurance (EL).

EL covers your business in the event that one of your staff members claims they’ve suffered an illness or injury as a result of working for you. It covers any legal and compensation costs involved in defending the case.

If you don’t have EL, the Health and Safety Executive (HSE) can fine you £2,500 for every day you go unprotected. So, flouting the law could be costly.

Other policies you should consider

Even though EL is the only insurance that the law says you must have, most small business owners choose to invest in other policies to protect themselves against unforeseen events and financial losses.

Public liability insurance

Public liability insurance (PL) is one of the most popular policies for small businesses, as it covers you for claims made against you by members of the public.

We all know that accidents happen. But if you or one of your team accidentally causes injury or property damage to a member of the public, your business could face hefty legal fees and compensation costs running into the millions. This is where PL is so important, picking up the bill and keeping your business up and running.

It’s also worth noting that your clients and suppliers may request you have PL as a condition of working for them. So, it’s a critical cover in more ways than one.

Contents and portable equipment insurance

Every business has technology, equipment and other physical belongings that they rely on, without which your whole operation would grind to a halt.

Contents cover is designed to keep the show on the road whatever happens, by protecting all your physical bits and bobs in the case of theft, fire, flooding, loss or damage. So, you do not have to foot the bill for expensive replacements.

As the name suggests, portable equipment insurance is for all the stuff you take out and about with you, including:

• smartphones
• laptops
• tablets
• cameras

Standard contents cover is for everything you keep on site, such as your furniture, fit-out and fixed equipment.

Professional indemnity insurance (PI)

PI is designed for those businesses who offer a professional service or advice. It will cover you if you make a mistake, or if a client suffers (or claims to suffer) a financial loss as a result of your work, picking up the bill for any legal and compensation costs. And as with PL, some of your customers are likely to insist upon PI – so it could even help with your new business.

Directors’ and officers’ liability insurance (D&O)

Any business founder or director should also seriously consider investing in directors’ and officers’ cover (D&O) – also known as management liability insurance.

Rather than protecting the business as a whole, D&O protects the individuals who have management responsibility in the business. It covers them for any claims against them personally, including breaching health and safety laws, misadministration of the company pension, or errors in financial reporting.

In these situations, the penalties can be significant, including fines, disqualification or even a prison sentence. D&O will help you defend your corner, while covering legal and compensation costs. This is a key one to have if you’re seeking investment, as investors are likely to ask if you’re covered.

There are a few points to watch out for when purchasing management liability cover, particularly if you’re a startup. Many policies do not cover businesses for insolvency, one of the biggest risks facing early stage businesses. So, make sure you find one that does.

You should also look for a policy that includes claims made by large shareholders (who have more than 15% of the business), or you could find you’re not covered for certain claims.

Cyber liability insurance

Cyber-crime has fast emerged as one of the biggest risks facing businesses of all sizes, particularly as the data mountain continues to grow.

Cyber liability cover is designed to help mitigate that risk, by covering businesses for data breaches and cyber-attacks and all the damage they can inflict. In the event that you’re hit, cyber insurance will cover any legal claims, compensation costs, and fines under the GDPR (where legally insurable). In some cases, it can provide a fast response plan including legal, IT, PR and customer service support.

How to get insurance for a small business

So now you have a better idea of what insurance your business needs, where should you go to find the best deal?

Of course, all insurance providers weren’t created equal. So, look for one that offers cover that’s tailored to your specific business needs and can give you flexibility as your business grows.