What type of insurance does a small business need?

Knowing the type of insurance required for your business can be viewed as quite daunting, however by ensuring that you have the right insurance cover in place is something which is not only paramount to any business but also offers peace of mind.

There are vast numbers of insurance products out there catering for differing eventualities, but for many people, it’s the knowing what business insurance they’ll need to sort first, which is often the biggest question.

So what businesses need insurance?

According to the Employers’ Liability Insurance Act 1969 every business in the United Kingdom that employs one or more members of staff, has an obligation by law in needing to sort and have on place an active Employers’ Liability Insurance policy regardless of what a company does.

The reason being is that Employers’ Liability Insurance will cover the business in the event of an employee being injured at work or who may become ill as a direct result of their work for the company subsequently making a claim for compensation.

It’s fair to say that there are certain types of businesses, government departments as well as non-limited family businesses, who may be exempt, but all other companies must comply with the legislation.

What level of cover is required?

The minimum level of cover for an Employers’ Liability Insurance policy is £5 million, however, businesses often take out higher levels of cover, with £10 million worth of cover being a more common figure even for those that are relatively small companies.

Depending on the size of the business and the risks involved with the work the business undertakes, it may be necessary to pay for a greater level of insurance cover.

It is worth noting that the Health and Safety Executive (HSE) is responsible for enforcing the laws on Employers’ Liability Insurance, a result of which is that it can fine those businesses up to the value of £2,500 per day who do not have a policy in place.

In the most of the extreme circumstances, the HSE does have the authority to close down those businesses which refuse to comply with regulations.

Do I need to know anything else?

When a business takes out an Employers’ Liability Insurance policy, it will receive a certificate from the insurance provider.

The certificate should then be displayed in a prominent location within the business to ensure that employees can read it, if and when necessary.

Businesses are legally required to keep a copy of the policy document for a minimum period of forty years as well as being obliged to show it to the HSE if requested. Should a business fail to comply with either of the above the result can be a fine of up to £1000.

It’s important to note that Employer’s Liability Insurance is only valid in the United Kingdom and on offshore platforms in its waters.

This means that should your company have employees which are based outside the UK, a check will need to be undertaken of the employment laws in those countries and take out any necessary insurance policies.

Larger companies may be legally required to take out other policies aside from Employer’s Liability Insurance.

Those businesses that operate any sort of vehicles must take out motor insurance, either in the form of individual policies for each vehicle or ‘fleet’ cover when a larger number of vehicles are involved.

Many other businesses are also obliged to take out Professional Indemnity Insurance; the likes of lawyers, accountants and financial advisors must have this type of insurance by law.