Being an entrepreneur is one of your life’s most liberating and frightening decisions. You make tough choices, have roller coaster rides and yet hope for a better tomorrow. Insurance is one of the most trusted resources to help you cross hurdles and mitigate risks.
While it might not be on top of your checklist, having adequate insurance in place could make a difference in your startup business.
This post will cover everything about business insurance UK.
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Why do startups need business insurance?
As a new startup owner, you will look for ways to cut costs and save money. But there are areas you shouldn’t skimp, like getting business insurance.
Business insurances are not just a necessity but an opportunity for startups. Getting the proper protection reduces the chance of risks with the potential to hinder your business.
Reasons for having insurance for a startup
1. UK laws mandate specific insurance
If you are in the UK, the government mandates specific business insurance, which includes employers’ liability or workers’ compensation Insurance.
Employers must be responsible for their workers’ health and safety, ensuring they are financially cared for in case of work-related accidents, injuries or illness. Failing to fulfil the criteria may lead to criminal penalties or fines.
2. You can impress talents
While trying to win new talents, you need to showcase your job perks, including insurance. A job looks promising to the candidates when they find health and safety insurance.
3. Litigation costs can harm your business
Look for the best business insurance that covers your business during any potential liability claims against it. You might face an accident, a broken contract, or a product that doesn’t perform well. Insurance can save you from paying the expenses with your personal finance.
4. Your business is more credible to potential customers
Insurance can increase your credibility to customers, especially in a B2B business where clients ask for proof of insurance coverage before closing a deal. It ensures your products and services are safe.
5. It attracts investors
When you add insurance as a part of your company data, investors appreciate your maturity and foresight. Furthermore, when somebody invests in your business, they will try to protect themselves from risks.
6. You are likely to take high risks
As a startup, you will try to take new roads to reach success, and there can be numerous risks along the path. Though you can control some, the chances of unexpected accidents and uncontrollable risks are high compared to an experienced company. To prevent these costs and losses, you need insurance.
What insurances do your startup need to have?
Insurance can protect you from various risks; however, which one to get depends on the nature and size of your business.
Here is a list of 9 business insurances your startup must consider,
1. Public liability insurance
Public liability insurance covers you against any financial losses when a compensation claim is brought against your business. In short, it covers all your costs when you cause damage to any individual or property during your work period.
However, purchasing such coverage is not your legal requirement; considering them is good when you work with third parties like suppliers or customers.
2. Employer’s liability insurance
If you have employees in the business, getting an employer’s liability insurance is your legal requirement as an employer. Such insurance covers the cost of employees who suffer an accident or illness during their working hours.
3. Professional indemnity insurance
Professional indemnity insurance will protect you if a client loses money due to negligence in providing advice or services. According to clients, your mistakes may include breaching confidentiality, infringing copyright or giving advice that results in losing money. It can cover legal costs with compensation pays.
For example, a graphic designer or consultant may need such insurance.
4. Product liability insurance
Product liability insurance covers you when you sell a product that causes injury or damage to the public. According to your policy limit, such insurance can protect your legal cost and compensation payments.
For example, if you made a product that harmed the user, they will charge a compensation claim against you. Product liability insurance will assist in avoiding paying them from your pocket.
5. Buildings and contents insurance
If you have a business premise like a shop or an office, buildings and contents insurance is a must, though not a legal requirement. But, if you rent the space, your landlord is responsible for covering the building while you protect your contents.
6. Home business insurance
If you are using your home as a business premise, getting a domestic building and contents insurance will not cover items used for business. But home business insurance can protect you from buildings and contents, public liability and professional liability.
7. Tools or stock insurance
Tools or stock insurance will protect you from the cost of replacing them when they are lost, stolen or damaged.
8. Income protection insurance
It is a small business insurance that covers the income of self-employed people when they get sick and can’t work. You need to agree on how much you want to get paid each month and pay your insurance premium accordingly. It will cover the payment for up to 12 months per claim, and you can claim multiple times during the term.
9. Vehicle insurance
If you have a commercial vehicle used in business, vehicle insurance can cover you for accidents and issues incurred while using it for business purposes.
How to calculate startup insurance premiums?
If your business doesn’t have a trading history, the insurance premium depends mainly on conservative projections for the first year’s revenue. It also includes the industry you are working in, the types of services and goods you sell, your annual revenue and employee numbers.
While starting your business, every penny you spend must be worth your business. Spending money on purchasing insurance protects your business and cash flow and demonstrates to new clients and investors how serious you are in the industry.
It reassures your staff directors and investors that everything in business is protected and keeps you away from an increasingly litigious society.