What type of business insurance do I need? From legal requirements to optional extras
June 5th 2024
Whether you’re launching a startup, expanding your side hustle or running a longstanding local business, understanding what business insurance you need is crucial.
In fact, in 2023, 44% of small to medium-sized enterprises ran without insurance, meaning 2.4 million businesses were underinsured and exposed to all kinds of risks!
Don’t be a part of this statistic. And if you don’t know where to begin, luckily, we’ll help you figure it out in this Bionic guide.
How do I know if I need business insurance?
If you run a local coffee shop or you sell goods in a shop, you’ll need coffee shop business insurance. Say you accidentally spill a hot drink on a customer's lap or a member of the public trips on an exposed wire on your premises — a lack of insurance could mean you end up paying hefty fees out of your own pocket.
“But what if I’m running a side business?” we hear you ask. Yes, you’ll still want to have business insurance in place to make sure you’re properly covered should the unexpected happen.
Is business insurance a legal requirement?
While not all business insurance options are legal requirements, you’ll need two policies by law.
Employers liability insurance
If you employ staff, even on a casual or temporary basis — and they aren’t immediate family members — you are legally required to have employers’ liability insurance.
This covers any claims made by employees getting injured, falling ill, or dying while or due to their work. Employers’ liability insurance covers the cost of any compensation claims, legal fees or medical bills if your business is found at fault.
It's worth noting that if you employ only immediate family members - you won't have protection against claims they make against you without employers' liability insurance. And if you are a limited company, regardless of whether you are family or not, you should have employers' liability cover.
Business car or commercial vehicle insurance
As with domestic vehicles, if your business uses cars, vans, or anything in between, you’ll need business car or commercial vehicle insurance.
Regular car or van insurance will not cover yourself or your employees if they’re driving a company vehicle. Business car or commercial vehicle insurance covers vehicles used for business purposes, such as driving to and from properties if you’re an estate agent, for example.
What insurance do I need for my business?
Every business is unique, so the insurance you need will vary — a manufacturing business won’t need the same type of cover as a takeaway!
But it’s worth considering these other types of insurance options that most businesses will need.
Public liability insurance
If your business interacts with the public in any way, then you’re going to need public liability insurance. It covers claims made by clients, customers and members of the public who suffer injury or property damage due to your business activities.
For example, if a customer slips and falls on a wet floor on your premises, public liability insurance can help cover legal fees and compensation costs. This type of insurance is particularly useful for businesses with a lot of footfall, like shops, cafes and salons. With it, you could avoid significant out-of-pocket expenses and damage to your business reputation.
Product liability insurance
If your business manufactures, supplies or sells products, product liability insurance is essential. It protects you against claims of injury or damage caused by defects in the products you supply.
For instance, if a product you sell malfunctions and causes injury to a customer, you could be held liable. Product liability insurance covers the legal costs and compensation fees you could face, helping to protect your business against financial losses and any potential lawsuits. This type of insurance is especially important for manufacturers, retailers and e-commerce businesses.
Professional indemnity insurance
Professional indemnity insurance is vital for businesses that provide advice, consultancy or professional services. It covers the legal costs and damages if a client claims that your service or advice caused them financial loss.
For example, if you’re an architect and a client claims your design was flawed, resulting in costly repairs, professional indemnity insurance covers the associated costs. If you work in professions like consulting, legal services, accountancy, or design — where mistakes can lead to significant financial consequences — this type of insurance is invaluable.
Commercial property insurance
Whether you own or rent a business premises, commercial property insurance protects your buildings and their contents from risks such as fire, theft and natural disasters. This type of insurance covers the costs of repairing or replacing damaged property, including equipment, inventory and furniture.
For example, if a fire breaks out and damages your office, commercial property insurance can cover the cost of repairs and replacing damaged items. This insurance is vital for all types of businesses, from retail to offices, to ensure that your physical assets are protected.
What other types of insurance might I need?
Beyond the essentials, some businesses will need specialised industry-tailored insurance options.
Salon insurance
Designed for hairdressers and beauty salons, salon insurance covers everything from public liability to treatment risk cover. This includes protection against injury claims or if one of your clients suffers an allergic reaction caused by one of your treatments. You’ll also be covered for your equipment and stock.
Find out more about salon insurance.
Trade insurance
For tradespeople, trade insurance can cover tools, public liability, and even personal accident cover. This insurance ensures that tradespeople are protected against claims of damage or injury caused while on the job, and it also covers the cost of replacing tools if they’re lost or stolen. For example, if a plumber accidentally damages a customer's property while working, trade insurance can cover the cost of repairs and any legal claims.
Read more about trade insurance with Bionic.
Shop insurance
Shop insurance is a package that covers everything a retail business needs, from stock and content insurance to public and employer liability. This type of insurance is designed to protect against risks such as theft, damage, and customer injuries, making sure that your shop can operate smoothly, even in the face of unexpected incidents. For example, if a thief breaks into your shop and steals valuable inventory, you’d be covered for the cost of replacing those stolen items.
Find out more about shop insurance today
Takeaway insurance
Takeaway insurance is a tailored business insurance package for takeaways and fast-food restaurants. It includes cover for everything from stock to public liability and ensures that your business is protected against risks like food poisoning, delivery accidents and damage to equipment. If a customer becomes ill after eating your food, for example, and makes a claim, takeaway insurance can cover the costs of legal expenses and any form of compensation.
Discover more about takeaway insurance now.
Cafe insurance
Similar to shop insurance for stock and contents insurance, cafe insurance has added coverage for food hygiene and safety standards. For example, you'll be held responsible if an employee burns themselves on a hot plate or spills coffee on a customer's expensive coat. Cafe insurance covers your business for the cost of claims made against you.
Find out more about cafe insurance.
Builders insurance
For those working in the construction industry, builders insurance includes cover for things like public liability and cover for tools and equipment. Builders insurance aims to protect against risks like accidents on construction sites, damage to buildings under construction and theft of your important tools needed to get the job done. If a worker is injured on-site, for example, this insurance can cover the medical expenses and legal fees.
Hotel insurance
When you run a hotel, you probably have a million things running through your mind at all times. Hotel insurance is a comprehensive policy that covers everything from public liability to damage to property. This insurance protects your business against claims from guests, such as slips and falls, as well as damage to hotel property caused by guests and natural disasters. For example, if a guest slips on a wet floor in your hallway and files a lawsuit, hotel insurance can cover the legal costs and compensation.
Cyber insurance
Cyber insurance is becoming increasingly important for businesses. It protects against data breaches, cyber-attacks, and the fallout of dealing with these incidents. This insurance will help cover expenses like data recovery, legal fees, and compensation for affected clients. If your business suffers a data breach, for example, and your customer information is compromised, cyber insurance can help cover the costs of notifying customers, legal action, and the potential costs of restoring the data.
What are the risks of not having business insurance?
Opting out of business insurance can leave you vulnerable to a range of threats that can really put your business at risk — from serious financial mishaps to operational consequences — it’s simply not worth the hassle.
But what are the exact risks of not having business insurance?
- Financial loss from potential lawsuits — If you don’t have insurance, legal claims from clients or customers can lead to substantial financial loss for you and your business. Say a customer slips and falls on your premises and decides to sue - you could be held liable for covering all legal fees, court costs and any compensation awarded. Legal expenses can escalate quickly, potentially crippling your business — even if you manage to win the case, the cost of legal defence can be high.
- Property damage costs — Damage to your property by fire, theft or natural disaster can be costly to repair and replace and can put a deep strain on your business. Without proper cover in place, you’d have to bear the cost of any repairs, rebuilding or replacement of stock and inventory if something happens to your business. And, if you don’t have the financial means, this could mean closing your business for good.
- Damage to your business reputation — Handling claims without proper cover in place can damage your business's reputation, impacting customer trust and loyalty. Customers and clients expect businesses to operate responsibly and be prepared for any potential issues that crop up. A bad reputation can result in a drop in sales, loss of clients and long-term harm to your brand — which isn’t ideal.
Get your insurance set with Bionic
Insurance can be tricky, and knowing which options your business needs isn’t exactly easy. But, having the right insurance in place can protect your business from a wide range of risks and bring you peace of mind as you run the day-to-day operations.
Get in touch with us today by starting a quote online or head over to our business insurance guides to find everything there is to know about sorting your insurance.
