NCF member Adam Penny has worked in insurance for more than 30 years. Along the way, he’s seen the good, the bad and the downright awful when it comes to policies. Fortunately, as an Insurance Consultant and broker, he can give the benefit of his experience to his clients. As most NCF members are small business owners, we asked Adam what are the ‘essentials’ we should all be thinking about when it comes to insurance.
Running your own small business is a brilliant adventure but it definitely comes with its fair share of risks. Whether you’re working from a home office, freelancing or managing a growing team, the right insurance can protect you from unexpected bumps in the road. Let’s be honest, however much we think they won’t happen to us, those bumps do happen, and always when you least expect them.
So what kinds of cover should you really be thinking about? Every small business owner in the UK should consider the following.
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Public Liability Insurance
This is probably the most common insurance for small businesses, and for good reason. It covers you if a member of the public – a customer, client, delivery person or just someone passing by – gets injured or has their property damaged as a result of your business activities.
Say someone trips over a cable in your office or you knock over an expensive piece of equipment while at a networking event, public liability insurance can cover the compensation costs and legal fees. It’s not legally required, but many clients and partners won’t work with you unless you’ve got it, especially for events or contracts.
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Professional Indemnity Insurance
If your business provides advice, consultancy, design work or any service where a mistake could cost your client money, then this is for you. Professional indemnity (PI) insurance covers the legal costs and compensation if a client claims that your work or advice caused them financial loss.
This could be anything from a design flaw in a construction plan to a data error in a financial report. Even if you’re confident in your work, claims can still arise and defending yourself can be expensive. Some industry bodies and contracts even require PI as standard.
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Cyber Insurance
There rarely seems to be a day go by when there isn’t some sort of cyber trouble in the news. The problem is that it’s only the big companies (thinking of the recent M&S attack) that make the headlines. Don’t let this give you a false sense of security; smaller companies are attacked as frequently, it’s just that they are less newsworthy. Often, but not always, a smaller business may the target of a random attack, some hacker simply trying to disrupt your business because they can, rather than because they think there is value in the data that you hold.
Whether it’s a phishing scam, ransomware attack or data breach, they can all bring your operations to a halt and seriously damage your reputation. Cyber insurance helps you bounce back. It can cover the cost of restoring data, informing affected customers, hiring IT experts and even paying for legal help or regulatory fines. Some policies also include help with PR, handy if your reputation takes a hit. If you handle customer data, sell online or even just rely heavily on email, this one’s worth a serious look. (Don’t think about how much your business or data is worth to someone else, how much is it worth to you if you can’t access it?)
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Employers’ Liability Insurance
If you have employees, even just one, you must have employers’ liability insurance by law. This includes part-time staff, temporary workers and even volunteers in some cases. (Payment does not necessarily define an ‘employee’).
Accidents can happen in any workplace and even a relatively minor injury could lead to a claim. Your EL insurance covers you if a staff member is injured or falls ill due to the work they do for you, for example. As it’s a legal requirement, you could be fined £2,500 for every day you’re not properly insured so it’s a no-brainer.
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Directors and Officers (D&O) Insurance / Management Liability
This one’s a bit less well-known but really important for anyone in a leadership role. If you’re a company director, senior manager or officer, D&O insurance protects you personally if you’re accused of wrongdoing in the running of the business. It’s also known as management liability insurance.
Claims could come from disgruntled employees, regulators, shareholders or even creditors. They might involve things like mismanagement, breach of duty or employment law violations. The cover helps with legal fees, settlements and other costs, so you’re not left to personally foot the bill. It’s especially relevant for limited companies or those with growing teams. Again, no one intends to make mistakes but what value the peace of mind in knowing that you have cover if you do?
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Business Assets and Contents Insurance
Think about all the stuff your business relies on to function: laptops, stock, tools, furniture, specialist equipment. If anything were damaged or stolen, could you carry on doing business without it – and for how long? Would you be able to replace it quickly without breaking the bank?
Business contents insurance protects your physical assets from things like fire, theft, flood or accidental damage. Some policies will also cover portable equipment when you’re out and about, ideal if you’re working from different sites or visiting clients. It’s not just for shops or offices, any business with valuable kit should consider it.
Final Thoughts
Insurance isn’t everything. Just because you have house insurance doesn’t mean you don’t lock the door when you go out. Just because you have cyber insurance, doesn’t mean you shouldn’t update your virus protection regularly. Insurance can’t stop awful things happening but it does give you the peace of mind to know that, if something unexpected does happen, you’re not facing the fallout alone. I always say that you never really know the value of an insurance policy until you have to claim on it; too late to realise that the cheapest deal was also the shoddiest cover.
As a small business owner, the best combination of cover will depend on your type of business, how many people you employ and the kind of work you do. It’s well worth speaking to a broker who understands the needs of small businesses so they can help you tailor a package that suits you, without overpaying for cover you don’t need. Another advantage of using a good broker is that they will also be on hand to support you should you need to make a claim.
You’ve poured time and effort (and probably some blood, sweat, and tears!) into your business so make sure it’s properly protected.