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Business insurance

Insurance increases your business overheads but is absolutely essential - indeed, some insurance is compulsory (such as employers' liability and motor), but it makes sense to cover yourself against other contingencies (such as theft or fire). It is very tempting to reduce the costs to the bare minimum by under-insuring, but this can be a mistake since should the worst happen, your business could be left without vital resources.

What insurance cover must my business have?

This will depend on the work that your business does and the specific dangers and risks involved. Employers' liability insurance (insuring against any injuries to employees) is compulsory for all businesses that employ staff other than the owner's family. If the business runs its own motor vehicles, you must also have motor insurance. If you, or your staff, use your own vehicles for business activities, you should check that the insurance of the individual users provides cover for business purposes.

The other important kinds of insurance to consider are:

  • Public liability insurance - against injury to the public caused by the business.
  • Product liability insurance - against injury caused by your product (this insurance is taken in conjunction with public liability insurance).
  • Building and contents insurance - if you own premises.

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What other types of insurance cover are available to protect my business?

  • Key person insurance - against the prolonged absence or loss of an important member of the business.
  • Professional indemnity insurance - for professionals whose advice or service might make them liable for legal claims.
  • Business interruption insurance - against the risk of having to stop trading for any length of time.
  • Credit insurance - against the risk of not getting paid by customers (this is expensive and will not be available until you have a decent trading history).
  • Fidelity insurance - against losses due to fraud or dishonesty by employees.
  • Legal expenses insurance - against unexpected legal costs (this is often provided as part of a total insurance package).

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How do I choose an insurance broker?

Insurance brokers are private consultants who will assess the major risks to your business and recommend suitable insurance products. To choose a broker, start with recommendations from colleagues in business or from your accountant. You can also talk to professional broking associations such as the Association of British Insurers or the British Insurance Brokers' Association, which will be able to give names of brokers in your area.

Meet with three or four brokers and compare the services they offer, their knowledge of your industry sector and their costs.

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What fees should I expect to pay?

Generally, you will not have to pay a fee for a broker's services. They earn a commission from the insurance companies whose policies they sell. Some brokers do charge fees to their clients, however, so clarify this when you meet a broker for the first time.

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Hints and tips

  • Shop around before you decide on an insurance product, as prices will vary surprisingly.
  • Ensure that your insurance is in place before you start trading.
  • The Association of British Insurers (ABI) produces advice specifically for smaller businesses.

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