I'm starting a business: What insurance do I need?

Making sure your business is adequately covered is crucial. For those starting out, knowing what business insurance you need for a new business can seem overwhelming. But it's equally important that the cover you're taking out is right for you.

In this blog, we look at some of the essential business insurance products, and the types of business they're suited to, so you can make an informed decision when arranging cover.

Define your business

There are a range of business insurance products available, but it's important to bear in mind that not all of these will be relevant to every business. Some types of business will need a certain type of cover, while others won't.

So before you buy any insurance, take the time to think about what your business does, as paying for insurance you don't need is an unnecessary cost.

This will help you to understand what it is exactly that you'll need cover for to get the right insurance for your business needs.

What are the main types of small business insurance?

Every business is different and there is no one-size-fits-all policy when it comes to small business insurance, so be sure to find insurance that can be tailored to reflect your business's specific needs.

Different businesses come with different risks. Someone who gives advice to clients, like an IT consultant or an accountant, is going to need a different type of insurance to someone who physically interacts with clients, like a nail technician.

Similarly, if you run your business from an office, you're unlikely to need exactly the same cover as someone who runs their business from home.

You also need to consider the different elements of your business that you'll need cover for. Do you have stock? Do you have employees? The type and size of your business will determine what type of insurance you need.

The most common types of small business insurance are public liability, professional indemnity and employers' liability insurance. It's likely that your insurance policy will include at least one of these elements as your base cover.

You can then add additional features to your policy to cover the specific and unique aspects of your business.

Public liability and products insurance

While some business insurance products may not be suitable for you, just about every small business will need public liability insurance.

Public liability insurance provides cover against claims made by members of the public who have suffered injury or damage to property in connection with your business.

For example, if someone injures themselves while visiting your stall at an event such as a craft fair, any compensation awarded as a result could be claimed from your business. Not necessarily the organisation holding the event.

Your business could also be held accountable if your customers suffer injury or damage to their property as the result of a product you sell or supply. So if you make or supply products to your customers, make sure that product liability cover is included in your public liability policy.

Product liability will insure your business against legal costs or compensation awarded to the person making a claim against your company.

Although by law businesses don't need this cover, it's a sensible investment. Having product liability cover could mean the difference between success and failure for your business.

Contents and building insurance

Whether you run your business from home or an office, you need to make sure your business contents are adequately covered.

Computer equipment, stock and materials are all crucial to your business's success and often very expensive to replace if damaged or stolen. So you need to make sure they're covered against loss and damage.

While many new entrepreneurs assume that their business activities will be covered as part of their home insurance policy, it's crucial to note that this isn't always the case.

You'll also need to make sure that your business premises are covered against risks such as:

• theft

• storms and floods

• accidental damage

• fire, lightning, explosions or earthquakes

Cover for business contents and buildings will usually come as standard with many home business insurance and landlord insurance policies. However, check that this is the case with the insurer, before you agree to take out the policy.

Professional indemnity insurance

If your business provides professional advice, chances are you'll need professional indemnity insurance.

Also known as professional liability insurance, this covers your business against claims made by clients or customers who feel that the service you've provided has been negligent, or has caused them to lose money or suffer damage to their reputation.

This makes it a crucial product for many businesses – including architects, consultants, estate agents and accountants – where advice and design work play a central role.

Many clients, such as local authorities or large companies, will even ask you to provide proof of professional indemnity insurance before agreeing to work with you. So if you're starting a business in these types of sectors, taking out professional indemnity insurance could be a smart move.

Employers' liability insurance

If you have employees, you'll need to make sure that they're insured. In fact, by law you have a legal duty to insure them.

Employers' liability insurance provides precisely this cover, and will insure your business against claims made by employees who have fallen ill or suffered an injury during the course of their employment with you.

The amount of cover you'll need will depend on a number of factors (such as the number of employees you have) but it's compulsory to have at least £5 million of employers' liability insurance. Many insurers will provide £10 million as standard, but check the policy for the exact figure before you buy.

You'll also need to make sure that your employees know that they're covered. You can do that by displaying your certificate of insurance (which your insurer will provide once you've taken out the policy) in your business premises at all times.

What cover do I need if I work from home?

If you work from home, the insurance you require will depend on the nature of your business and what you want insured. It's advisable to obtain a specialist home insurance policy to properly cover your business.

Home business insurance can cover you for public and products liability, theft of business money at home or in transit, business interruption if you can't trade due to an insured disruption, such as a fire or flood, and business contents and stock.

What cover do I need if I store stock at home?

For many business owners, your stock is your livelihood, so it's vital that you have the right cover in place in case something unexpected happens.

If you store stock at home, you'll need a policy that includes cover for business stock and contents.

Many home business insurance policies can cover a total sum insured for business contents and stock up to £75,000. This covers furniture like office chairs and desks, business items such as sewing machines or cooking equipment, and the stock you sell.

If your insured items are damaged due to a fire or flood, or if you're the victim of a burglary, having business contents and stock cover will mean your insurer can reimburse you for the cost of replacing the items and get you back up and running quickly.

Do I need different insurance if I work away from home from time to time?

Insurers know that you might need to work away from home sometimes, whether you're travelling for a business trip or even working while on holiday.

Not all home business insurance policies cover the risks of working away from home, so you may need to add additional cover features to your policy. Before you work away from home, check your policy documents to see what's covered and what isn't.

If you're working away, you may want to cover the business equipment you take with you in case it's damaged or stolen. You should also check whether your vehicle insurance is valid for business use.

Free guide to small business insurance

Don't make the mistake of thinking insurance is only for larger companies – the truth is it's even more important for small businesses.

We've created a small business insurance guide to help you navigate the world of business insurance and make informed decisions that protect your interests.

What the guide covers

Our guide Getting covered: How to protect your small business with insurance lays out everything you need to know about insurance for your small business. Here's a sneak peek of what you'll find inside:

• Why small businesses need insurance: Understand the importance of insurance for protecting your business from everyday risks and larger-scale events.

• Common types of business insurance: Learn about essential types of insurance such as public liability, professional indemnity, employers' liability, and more.

• Insurance for specific businesses or sectors: Discover industry-specific insurance requirements and recommendations tailored to the type of business you run.

• How to research insurance options: Get tips on researching and selecting the right insurance policies for your business, making sure you have full, comprehensive coverage.

Small business insurance with Hiscox

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