Professional InsuranceGreat question. How long have you got?

The problem we have here is that there’s no one-size-fits-all answer. We can’t give definitives because every business is different and needs different things (which we know doesn’t help you much). But, we also know that you don’t want to waste valuable time trawling through websites and forums trying to find out; you just want someone to tell you what’s what and what’s needed.

Well let’s see if we can do just that.

Start at the beginning

First of all, you should consider the risks you face as a business. This doesn’t necessarily mean undertaking a protracted risk assessment; just focusing on the basics is enough to get you started. Think about what you do, where you do it, who you do it with and what you use to do it.

It’s possible that, for you, any and all of these things carry a potential risk. But don’t be too concerned about that. You just have to identify what the specific risks to your business are, whether they’re substantial enough to require insurance and, if they are, what insurance covers it (welcome to the world of underwriting, by the way).

So let’s break it down a bit.

The risk: What you do

What covers it: Professional indemnity insurance

Your business activity, your occupation, your profession, your expertise. It’s what your clients pay you for: the specialist advice or service you provide.

That’s great of course, but what if a client alleges you’ve made a mistake and it’s cost them money? Or that you’ve not done what they paid you to do?

If you need to defend yourself against aggrieved clients’ allegations of wrongdoing (with or without foundation), professional indemnity insurance pays for your defence and any compensation or rectification costs you’re liable for.

Depending on what you do, levels of cover usually range from around £100,000 to £5m, but can be higher depending on your client’s demands and the nature of the work. Professional indemnity insurance is a complicated beast. We recommend talking through what you need with a specialist broker to make sure you’re getting the right cover.

The risk: Where you do it

What covers it: Public liability insurance

Do you go out and about to your clients or have visitors to your premises? If there’s an accident (and it’s your fault) and someone is injured or their property is damaged as a result, you can be held liable. Consequently, if you’re sued for bodily injury or property damage, you’ll face a big bill for legal costs and compensation. Public liability insurance covers both those things.

Levels of cover usually range between £1m and £5m. A £10m level of cover isn’t uncommon, particularly if it’s part of a generic contract’s terms. Check this amount with your client if they ask for it – it can cost a fair bit.

The risk: Who you do it with

What covers it: Employers’ liability insurance

The only business insurance you’re legally required to have. It applies to the majority of UK companies.

If one of your employees is injured or falls ill whilst working for you, and they deem it’s your fault, they’ll probably sue you for damages. Employers’ liability insurance pays for your legal defence and any compensation due to your employee as a result.

Because employers’ liability insurance is a legal requirement, it’s a good idea to find out for certain if your business needs it. The Health and Safety Executive have a definitive guide for employers (PDF); it’s an easy read and should tell you everything you need to know.

Minimum level of cover for employers’ liability is £5m but you’ll find that most insurers and brokers only offer £10m.

The risk: What you use to do it

The cover you need: Office contents, buildings and property insurance

Do you have an office? With a computer, phone, desk, plants and so on? Do you take equipment out and about with you (laptop, projector, mobile etc)?

We all know what a pain a damaged or stolen laptop can be. Inconvenience is one thing; not being able to run your business is another. If you’ve invested money in business equipment, we’d suggest it makes perfect sense to protect it.

Levels of cover are up to you. Think about how much it would cost you to replace everything, worst case scenario, and that’s a good place to start (and we mean everything – right down to the last box of staples).

Tip of the iceberg

There’s lots more insurance out there for businesses that want it, of course. But what we’ve described here should be enough to get you started, and enough to cover the ‘everyday’ risks most businesses face.

Insurance is always a difficult purchase and, for many businesses, it’s a toss up between need, want and budget. You can insure pretty much anything these days – where you draw the line is up to you.

At least now you’ll know where to start.

Photo by ybs – CC