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To insure or not to insure? Your small business

By Chelsea Woodhall

 

Not quite the timeless question Shakespeare had in mind but an important one, nevertheless.

According to Statista, there were almost 6 million SME’s (Small and medium enterprises) in the UK which makes up to 99% of the whole business population. If you’re the owner of one of these then protecting it from any risks or interruptions is crucial to running and maintaining your business.

Whilst it may just be easier to ignore, you’d insure your car or home so why not your business?

 

But is it a legal requirement?

 

The only type of cover that’s compulsory in the UK is employers’ liability cover, it is a legal requirement if you employ staff or have any volunteers that work for you. Employers liability covers your business in the event of a member of staff submitting a claim for an illness or injury as a result of working for your business. It covers any legal or compensation costs involved in defending you.

You may be wondering 'why it is so important?' Considering you could be forced to pay a fine of up to £2500 per day, if caught operating without it, it’s a costly mistake not to have it in place.

 HSE data says - 89,461 successful employers' liablity claims were settled in the UK in 2018/19. With the average claim costing a company £5100.  Could you afford to pay that out for each of your employees?

Additionally, the profession your business operates in may mean you are required to have other mandatory covers by the regulator governing your industry.

For example solicitors, accountants, and some healthcare professions are required to have professional indemnity insurance. Whilst businesses that use motor vehicles are required to purchase at least third-party motor insurance.

The best way to check what insurance you would require is to contact your trade association and other professional bodies, or for tailored advice consider contacting an insurance broker such as Simply Commercial for a detailed review of your needs.

For more info on why using a broker is the best way to get your insurance click here

 

Protection is key

 

As I’m sure you know, running a business is risky - there are no guarantees and no way to predict what may happen. The only thing you can do is cover for all eventualities in case the worst is to happen.

Not having enough coverage can also be problematic. For instance, your business premises are in a known high-risk flood area and you do have buildings insurance however the level of cover to pay out the full cost of repairing or rebuilding the premises was not included.

Consider cover for the building, contents, stock and equipment, product liability, business interruption, legal protection, and cyber protection plus many more.

That being said there is no sense in covering risks that do not apply to your business- for example, goods in transit cover would be unbeneficial to a Digital agency. Doing a through review would help reduce the chances of being overcovered.

Without going into too much detail as to what cover you may need (best to leave that to an advisor or broker) it is evident that having no cover at all could be extremely detrimental to your business.

 

Cutting costs (a fortune)

 

As a small business, you often operate on a similarly small budget. This means you may look to save money wherever you can. Often insurance can seem like a good cost to cut especially if you’ve never needed to claim. However, all it takes is for one small accident and you may regret making those decisions.

Imagine you own and run a local café; a customer has tripped over your wet floor and broke their legs because you didn't put a sign up. You weren’t aware of this accident occurring and are surprised when you’re contacted by the court letting you know a claim has been filed. You are left with no choice but to hire a solicitor and pay them for advice on what action to take.

You file a defence claim and court proceedings are extremely slow meaning the claimant gets increasingly agitated posting about it on social media which causes your reputation to take a hit so you lose some regular customers and the business is struggling financially.

The case then goes to trial meaning you have to take time off work so the business has to be shut down. You then lose the case and are ordered to pay compensation to the claimant out of the business as well as the medical expenses and legal costs for both parties. The business is now unable to reopen as there are no funds to pay your employees and debts owed to suppliers meaning you have no choice but to permanently close.

If you hadn’t cut your public liability insurance all you would do is notify the insurer that a claim has been filed, and they will instruct a solicitor to deal with it on your behalf meaning you don’t have to take any time out of work and can focus on the business. The court fees, medical expense costs, legal costs, and the compensation order are all covered meaning you do not have any extra expenses.

This is a worst-case scenario and doesn’t necessarily apply to you but hopefully, it highlights why insurance is essential for your small business.

 

If you decide to invest in business insurance then Simply Commercial can help. Our insurance policies are bespoke and tailored to suit your individual business needs, our dedicated team works on your behalf to get the policy most proficient for you and at the best price. Contact us today for more information.