Insuring Your Business

When starting a new business, recognizing the need for insurance is essential. It provides compensation and peace of mind in case of unforeseen events, although it can also represent a significant cost. If you are starting or have recently begun a business in the Nottingham area, AHACCOUNTANTS can provide further information on the types of insurance you may require.

Compulsory Insurance

1. Employers’ Liability Insurance:

1. • This insurance is compulsory if you employ staff. By law, you must have at least £5 million in cover from an authorized insurer, with many policies offering a minimum of £10 million. You are required to display the certificate of insurance in your workplace. If you are not a limited company and either do not have employees or only employ close family members, you may be exempt from this requirement. Limited companies with a single employee who owns 50% or more of the company’s shares are also exempt.

2. Motor Vehicles Liability Insurance:

1. • This insurance is compulsory for businesses using motor vehicles and must cover third-party liability, which is the legal minimum requirement.

Optional Insurance

Other types of insurance are optional, and whether you need coverage will depend on the nature of your business and an assessment of the associated risks.

1. Public Liability Insurance:

1. • While not compulsory, it is highly advisable for most businesses. This insurance covers claims for damages to third parties resulting from your business activities.

2. Property Insurance:

1. • You may choose to cover specific risks such as fire and flood or provide more general coverage. Assess the value of your premises (if owned), equipment, and stock. If you rent, check that your landlord has suitable insurance coverage.

3. Theft Insurance:

1. • If your business involves valuable equipment, consider theft coverage. Insurers will typically require a reasonable minimum level of security measures to be in place.

4. Professional Indemnity Insurance:

1. • This insurance is crucial if your business provides advice that could lead to client liability. It protects against losses suffered by customers due to negligent advice. In some sectors, like law, accountancy, and financial services, this insurance is mandatory, but it is also common in fields like IT consultancy and publishing.

5. Business Interruption Insurance:

1. • Also known as “consequential loss” insurance, it compensates for lost profits and additional costs incurred if your business operations are disrupted, such as in the event of a fire.

6. Key Person Insurance:

1. • Small businesses often rely on key staff members. Consider insurance to cover the financial impact of a key employee becoming seriously ill or passing away.

7. Specialized Insurance:

1. • Various specialized policies cover unique situations, such as engineering or computer insurance.

8. Working from Home Insurance:

1. • If you plan to start your business from home, be aware that standard household insurance usually does not cover business-related risks. Special “working from home” policies are available.

Shopping Around for Insurance

It’s crucial to compare policies and obtain multiple quotes to find the best deal. Be cautious of very cheap offers, as they may indicate inadequate coverage. Personal recommendations can also be invaluable in making your decision.

Level of Cover

Finding the right balance in coverage is essential. Too much coverage can strain your cash flow, while too little can have catastrophic consequences. Ensure you assess the level of cover you need carefully, particularly for buildings and equipment, and aim to cover the full replacement cost.

Additionally, if your policy has an excess, set it at a reasonable level to avoid financial strain in case of a claim.