FinancesWhat type of insurance do I need for my small business?

What type of insurance do I need for my small business?

You might have wondered if there is a need to get small business insurance. In the UK, the law dictates that every business must have employer liability insurance, especially if you have employees. However, is it necessary to get other business insurance? Let’s dive in.

Many small business owners will wonder if it is necessary to pay for commercial insurance since, unlike a big corporation, budgets are tight and insurance cover can be expensive. Let’s find out which types of insurance cover your business needs.

Do I Need Public Liability Insurance?

Public liability insurance refers to insurance that covers legal claims by the general public to cover legal fees resulting from death, injuries, and property damage associated with the business. Public liability insurance can protect your small business from crippling legal costs resulting from potential compensation costs.

The general public includes third parties such as visitors, customers, and delivery personnel. Unlike employer liability insurance, the law does not mandate small businesses in the UK to have public liability insurance.

Therefore, public liability insurance will protect the business if a customer gets into an accident while on the business premises and sues. Small business owners don’t have a lot of funds; therefore, such legal claims can kill the business.

You should consider public liability insurance if your business is located in public places where the public has a lot of access to, clients visit your business, and the business holds events or activities.

Understandably, small businesses might suffer from the costs of starting a business. However, you should set aside some funds for your public liability insurance. Additionally, some clients only associate with businesses with public liability insurance; therefore, you can avoid losing business to competitors.

How Much Public Liability Insurance Do I Need?

The prices for public liability insurance vary widely; however, it is hard to lack an insurer within your budget. Generally, business insurance is an integral part of doing business. Besides, business insurance is fairly manageable, considering the potential risk a business may face in the long run.

In the UK, your small business can get public liability insurance at a cost ranging from 50-500 euros. Certain factors about your small business determine the business insurance quote, including turnover, business structure, location, number of directors, industry, and coverage. For instance, a self-employed trainer who wants professional services would pay approximately 50 euros. However, an incorporated construction limited company employing two directors can increase costs to 450 euros. You will likely spend even more if your business lies in higher-risk environments.

Do I Need Employer Liability Insurance?

The simple answer is yes. The employer liability (compulsory insurance) Act of 1969 establishes that any business operating in the UK is legally required to get employers liability insurance. Employers liability insurance protects the business against paying settlement and compensation claims if an employee gets injured or ill due to working with the company. That means that as soon as you get employees, you are required by law to get this type of insurance.

Interestingly, the UK requires even sole traders, small businesses, and organizations that are part of a global organization to get employer liability insurance, no matter the industry.

Notably, heavy fines are associated with having no employers liability cover, amounting to 2,500 euros per day. Additionally, if you don’t display the insurance certificate or refuse to show it to inspectors, you can be fined up to 1000 euros.

You might be self-employed and probably wondering if you need coverage for your small business. If you work by yourself, there is no need for this business insurance. You only need employers liability insurance if you have employed other people. Additionally, you don’t need the coverage if you employ close family members as part of the staff. However, you need coverage if you have limited company and employed immediate family members.

Keyman Insurance

Many smaller businesses would not be able to run without one or two key people who either have the vision or expertise or sales ability to create a successful business. To help the business protect itself in the case that a key employee leaves or is ill or injured, there is keyman insurance. We cover this specialist insurance in a separate article and if your business relies on just one or two important individuals, you might consider this type of policy.

Insurance for Business Equipment

Insuring equipment in your small business is crucial since it helps protect the business against theft, and you can quickly replace or repair equipment to ensure business continuity. The insurance covers damage, loss, natural disasters, theft, and harm to the employer, employee, and visitors. The decision to take these types of business insurance depends on whether your small business can survive without the equipment. Companies operating in the construction, healthcare, and creative industries can use such insurance. Consequently, there is no need for small businesses to add many costs to the cost of operations.

Small business insurance costs depend on the business type and tools insured. You should provide the correct value for your equipment to avoid being accused of insurance fraud. Additionally, you should ensure the insurer has correctly valued your equipment to avoid getting less compensation. The correct cost of the equipment is its price when it is new despite whether it was brought second hand or had a discount.

As a business premise, you can get portable equipment insurance for equipment such as phones. Interestingly, there are instances where the insuring company is not willing to give you compensation for equipment; these instances include cases of terrorism, general wear and tear, pre-existing damage, viruses, loss by dishonesty or fraud, and wilful negligence, among others.

Business Cyber Insurance for E-commerce

An e-commerce business faces risks that might not be similar to other businesses. The risks that e-commerce businesses face include stolen inventory, data breaches, or damaged goods when delivered. For online businesses, you might have workers’ compensation, commercial auto, commercial property, and general liability insurance.

This business insurance can also help you get protection against property damage, bodily injury, and loss of personally identifiable data. General liability insurance pays claims resulting from your business causing property damage and bodily injury. Commercial property insurance covers your business’s physical location, tools, and equipment. Equipment used by e-commerce businesses includes warehouses, inventory, and computers.

Business income insurance can help your small business replace lost income in case business has been interrupted due to property damage. General liability insurance helps cover costs associated with claims of small business products causing injury to others or property damage. You are more prone to online attacks because your business operates online.

Therefore, your business must have data breach insurance or cyber insurance. Such insurance can help your business cover risks associated with data breaches, such as data loss. Data breach insurance can help settle compensation to affected customers and provide credit monitoring for the company.  Additionally, you can get professional indemnity insurance to help the business improve its brand image and goodwill.

Businesses that require cyber insurance include virtual marketplaces, stores selling their products and services online, and brick-and-mortar stores with an online presence.

What Is Business Interruption Insurance?

This business insurance prevents small businesses from losing income when business operations cannot continue as usual due to unexpected events. This sort of commercial insurance ensures that your company will soon be back to where it was before the calamity struck.

Most insurers will cover your small business if there is damage to essential equipment, the business premises, or equipment by flooding, storm, or fire. In addition, some plans cover companies in case of absence of key personnel or harm to a key vendor, client, or other partners. Besides, the providers understand that you may need to shift your business to a new location; therefore, it covers the operation costs before settling in.

Also, the business insurance can protect you if loan payments, payroll, or taxes cause an interruption in the operating budget. Business interruption insurance often comes in other insurance packages, such as general liability insurance.

Is Business Insurance Expensive?

The costs vary according to your chosen insurance provider, your business’s nature, and your insurance claims history. Therefore, if your business operates in a high-risk environment, the cost of business insurance policies might be high.

High-risk enterprises need to invest in public insurance, regardless of the cost. However, there is affordable insurance coverage, such as professional indemnity insurance and product liability insurance.

There are many public liability insurance providers in the UK; therefore, you can choose the best professional service. You can compare business insurance by checking their business insurance quotes.

Before settling for a provider, first find out the business activities falling under the plan, if the provider provides compensation for lost work, or the maximum amount the insurer is willing to pay out in case of a claim. Additionally, it is crucial to carefully review the business insurance policies because some providers can hide certain terms limiting your coverage level.


One of the main purposes of small business insurance is to cover the costs of the business’s closure should a claim ever be made. So, protecting your business against public claims might be good because they can impede business.

Additionally, you might need to insure your business equipment, especially if you depend on them to generate profits. If you run an online business, you may also want to look into getting e-commerce business insurance and professional indemnity insurance. You can get professional advice on how to get the best insurance for small business owners.

Written by

Mark Hodgson
Mark Hodgson
Mark Hodgson is one of our expert writers. Mark is our lead researcher and editor who writes our main guides and expert topic coverage. He’s passionate about helping entrepreneurs, startups and small businesses with practical advice delivered clearly. Mark’s worked for a number of business magazines and titles and has started two small businesses himself, so has first-hand experience in setting up, managing and growing a small business and shares his expertise with our readers.

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