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Businesses in the twenty-first century have a great deal to protect. As well as needing to protect their physical infrastructure, their staff and their customers they also need to protect their online reputation, their business continuity and their digital architecture.
To this end, businesses of all shapes and sizes take out business insurance policies to protect what matters most to them. However, with so many policies and levels of cover to choose from, the business insurance landscape can be daunting territory for nascent entrepreneurs and new startups. Here, we will look at the benefits of business insurance, and how business leaders can ensure that they get the best cover for their needs and budget.
The benefits of business insurance
Business insurance is not only beneficial for SMEs, it may also be mandatory in some cases. Let’s take a look at some ways in which business insurance could benefit your company.
- Legal Compliance: Certain types of insurance may be necessary for your business to ensure legal compliance. For instance, under The Employers’ Liability (Compulsory Insurance) Act 1969 you will need employers’ liability insurance if you employ more than one member of staff.
- Protection Against Property Damage: If your business has a physical premise, it may benefit from buildings and contents insurance to protect against damage from natural disasters, accidents or vandalism.
- Liability Coverage: Liability coverage can mitigate personal liability if a compensation claim is made against the company (e.g. in the event of personal injury).
- Business Interruption Coverage: Business interruption coverage can help by covering lost income if your business operations are interrupted by changes in circumstances that are not your fault and cannot be foreseen. This may be a natural disaster, an extreme weather event, or the failure of a piece of mission-critical equipment.
- Employee Protection: Employers’ liability insurance protects both businesses and their employees. If a member of staff attempts to sue their employer, this insurance covers the cost of compensation. Likewise, if a customer claims the business, public liability insurance mitigates the liability of individual employees.
- Cyber Liability Insurance: 43% of cyber attacks target small businesses. Cyber security is a point of serious vulnerability for many small businesses, and no business is too small to escape the notice of cyber criminals. Cyber liability insurance can provide crucial support to keep the business afloat in the event of a data breach or malware attack.
- Professional Indemnity Insurance: Professional service providers can find their operations and reputations irreparably damaged when a client accuses them of professional misconduct or negligence. Furthermore, the cost of compensation in the event of a successful claim can be ruinous to business cash flow. Professional indemnity insurance can cover the cost of compensation and help limit the damage done to your business’s finances and reputation.
- Fulfilment of Contractual Requirements: The whole point of insurance is to mitigate risk, not just for your business but for its clients. As such, client contracts may require certain levels of business insurance coverage to mitigate their risk and provide peace of mind.
- Enhanced Credibility: Having an appropriate level of insurance coverage is a sign to prospective clients and partners that your business has a proactive approach to risk management and inspires credibility and confidence.
- Customisable Coverage: Most business insurance providers offer highly customisable business insurance coverage solutions, allowing them to mitigate the specific risks and vulnerabilities inherent in their business or industry without unnecessary insurance costs impinging on their cash flow management.
Assessing Your Business Insurance Needs
“What business insurance do I need?”. It’s a question that many new business owners find themselves asking. The answer, however, will depend on the specific needs of your business. There are no one-size-fits-all solutions. However, we can guide you through the process of assessing your business insurance needs and finding the right policy.
Risk Assessment
Identify the specific risks that are inherent in your industry or operational model. For example, if you are a professional service provider, you will benefit greatly from professional indemnity insurance. If you have physical premises that are open to the public, a public liability insurance policy is strongly recommended. Many insurance policies are tailored to the specific needs of certain industries (e.g. construction, retailers, catering etc.).
Legal Requirements
Under UK law the only compulsory insurance is employers’ liability insurance. This is mandatory to protect the business and its employees in the event of illness or injury at work. It is mandatory for all businesses that hire more than one employee, even if it is on a casual basis. The only exceptions to this are:
- Sole traders whose employees are immediate family members (parents, spouse, or children).
- Limited companies where a single employee owns more than 50% of the share capital.
Evaluating Business Size and Scale
It is vital to ensure that the costs and cover are appropriate to the size and scope of your business. However, as your business grows, so should your insurance cover. Choose an insurer with the flexibility to alter your insurance cover regularly as your business expands and its needs change.
Selecting the Right Insurance Provider
Now that we’ve looked at how to assess your insurance needs, let’s take a look at how to find the right provider.
- Step 1- Researching Reputable Insurance Companies: Read online reviews and talk to other business news to get a feel for not just what kind of coverage insurers provide but how they look after their customers.
- Step 2- Customisation and Flexibility: See how much scope there is to customise your cover and tailor it to the needs of your business. Will you be able to make policy adjustments as and when your needs change? Or will you have to wait for your policy to renew?
- Step 3- Cost Considerations: Balance premiums and coverage against your current cash flow and identify any hidden fees that might push your insurance costs up.
What is the best way to protect your business?
The right insurance policy can help protect your business, its employees, its operations and its reputation. Take the time to shop around and you’ll find that you can customise policies to your changing needs, so that your cover grows along with your business.
Take a look at some of the ways Square can help you grow your business.
