Starting A Business – Insurance
When starting a business, particularly if you are starting in a new industry or profession, insurance is the one of the easiest things to forget. The extra burden of cost an insurance policy puts on a business can be off-putting, and it can seem unnecessary in the early stages.
But certain types of tradesman or professionals would not be hired without insurance and most business owners just have too much to lose in the early stages not to be adequately covered.
How Do I Start A Business?
Thinking about starting a business? You’re not alone. Every year, thousands of people catch the entrepreneurial spirit, launching small businesses to sell their products or services. Some businesses thrive; many fail. The more you know about starting a business, the more power you have to form an organization that develops into a lasting source of income and satisfaction. There are many websites with ideas for starting a business. This page looks at the importance of proper business insurance, including public liability insurance.
What Is A Small Business?
What constitutes a small business varies widely around the world. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships. What constitutes “small” in terms of government support and tax policy varies by country and by industry.
Running A Business From Home
Many people choose to run a small business from home. These businesses still need proper business insurance.
Business Start-up – Printing
One of the first things that new businesses do is to buy business cards and stationery from companies such as Vistaprint printers. Insurance is another consideration for newly-established businesses.
Small Business Insurance
Make sure that insurance requirements are included in your business plan.
What Is A Business Plan?
A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.
How Do I Make A Business Plan That Incorporates Insurance Requirements?
It is essential to have a realistic, working business plan when you’re starting up a business.
A business plan is a written document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts. It has many functions, from securing external funding to measuring success within your business. Consider including the following insurance options in your business plan:
Professional Indemnity Insurance
Self-employed professionals, for example those who provide services to businesses or individuals in areas such as IT and accountancy, those who provide health and fitness services such as personal trainers or those who offer a service such as photographers or beauty therapists, should definitely consider taking out professional Indemnity insurance.
Professional indemnity insurance offers cover for some situations where you may have been negligent in dealings with a client or where there have been serious mistakes in your work, and as a result you have been faced with paying a claim for compensation. Any large payouts you might have to make could seriously cripple or even close down your business, not to mention the legal costs involved. Professional indemnity could cover these costs, ensuring your business doesn’t lose out.
Public Liability Insurance
For the majority of small businesses, Public Liability Insurance is the most important type of cover. Whenever a business involves contact with third parties, i.e. the general public, customers, suppliers etc, there is the possibility of an accident happening that may result in injury to that person or damage to their property.
For example, a plumber who works on his customer’s property for the duration of the job may be liable for any accidents that happen there as a result of his presence. Let’s say our plumber has been installing some piping in a kitchen. A pipe bursts once he has completed the job and the resulting flood ruins the plasterwork, wooden floor and some of the electrical appliances.
The plumber would probably be liable for the cost of repairing the damage. Or perhaps while he is carrying out a job, his client trips over a piece of stray piping and is seriously injured. The client may be able to claim compensation against the plumber, which if awarded would probably be attached to legal expenses.
Public liability insurance is the type of cover that would protect against these sorts of incidents. If you work in a high risk environment or with tools, it is also important to take out personal accident insurance on top of your business cover.
Employers’ Liability Insurance
If your business employs staff, even on a part-time or temporary basis, you must take out Employer’s Liability Insurance – it’s the law. You legally need to have a minimum of £5m cover, however many insurers will automatically put you down for £10m, so if you only have 1 or 2 employees you may want to double check how much you’re paying for.
Employer’s liability insurance may seem like a nuisance and unnecessary extra expense but the law is there to protect you and your business. If an employee is injured or becomes ill
in the course of their work, and it can be proven as your fault, you could face a claim for compensation. This policy will ensure that your business is protected from this cost. Another good reason for making sure you comply with this law is that there is a £2,500 fine for each day you are in business without cover.
There are some notable exceptions to the law:
If you are not a limited company and you only employ yourself or close family members.
If you are a limited company and have 1 other employee who owns 50% or more of the share capital.
Bespoke Insurance Covers
In addition to these three types of insurance, there are other covers which can be equally important, depending on what your business does.
For example, shops, tradesmen and small businesses may want to include Business Interruption Insurance under their policy. This cover compensates your business for lost income when your business is forced to suspend due to an event that is stated in your policy. It could be for an incident as small as a power outage lasting a couple of days that prevents your shop from opening, or one as big as a fire on your premises which could prevent your business from opening for weeks or months.
If your business holds any stock on its premises, insurance can be taken out specifically to protect it from theft, damage or destruction. There may be certain conditions attached to this type of insurance which dictate the manner in which the stock has to be stored. This is especially the case with specialist stores (antique shops for example) or flammable stock like books or paintings.
Similarly, you can get insurance to cover your tools if you are a tradesman. This can be a vital cover as good quality tools used by professionals are often very expensive and sometimes take time to replace. Any loss would be detrimental to a business where clients expect reliability.
As well as general theft from outside parties, you can get cover protecting your cash, tools and stock against theft by employees.
This seems like a lot of different insurance policies to undertake and one would assume that the cost for so many would be prohibitive. Many insurers, however, will include all of them under one policy and by doing so can cut the cost down. This also makes it easier when the time comes to renew.
Companies such as Simply Business can help make the buying process easier by offering a range of online quotes to compare from leading insurers, which are based on your individual information. You can buy instantly online and view the policy document attached to each quote given, to ensure that you are covered in the right areas.