Business insurance guide

Being a business owner can be stressful, but insuring your company correctly is vital to ensure that unforeseen difficulties don't bring you down.

The survival of your business is vital to the UK economy as the latest figures show that there are an estimated 4.8 million private sector enterprises trading in the UK, which employ approximately 23.1 million people.

With so many people relying on your business it is important that you protect it from all eventualities, whether that is the failure of a supplier, or a fire or flood that puts your premises out of action for months on end. This means that purchasing the most suitable insurance cover for your business is of the upmost importance. Although there is only a legal requirement on your part to have employer’s liability cover it is highly recommended that you take out comprehensive insurance on any business that you run.

There are a number of ways that you can purchase your insurance policy including going direct to an insurance company, going online if you are a small to medium-sized enterprise, or through the more traditional route of discussing your needs with an intermediary. As rates are still flat and the market is still soft, competitive premiums are easier to obtain whichever route you choose to go down.

Hopefully the information below will help you make an educated decision about the cover that you require.

Commercial property insurance

You may have owned your business for years or are currently in the process of setting up a new venture, either way, commercial property insurance is an essential purchase as it will allow you to protect your property, supplies and equipment from harm.

Just consider the catastrophic consequences for your business if it were to suffer a major fire or theft or if it was struck by the elements and received heavy storm damage. Whether you own an office, shop or site, damage to your property could result in a loss of trade and income but with a commercial insurance policy you can be safe in the knowledge that your business and its assets are protected against unforeseen circumstances.

Commercial property insurance is designed to cover buildings that are used for a variety of commercial purposes and can include shops, offices, warehouses, surgeries and takeaways for example. You may be an owner occupier or a landlord who is letting commercial tenants use the building in return for a rental income. Whichever category you fall into you need to remember that the cost of the policy will depend on level of cover that you take out, as well as the size of the business that you own.

Be aware that there can be a number of exclusions on an insurance policy so you need to go over the policy with a fine tooth comb and check the terms and conditions thoroughly. As well as the policy itself you need to check out the claims procedure of your insurance provider as this can vary considerable from company to company.

How is my premium calculated?

There are a number of different rating factors that will affect the way that your premium is calculated, these include:

Your postcode. This will tell the insurer or intermediary if your property is more susceptible to flood or subsidence damage.
Your security. Is your property protected by an alarm system? Does it have shutter and grills? The better the security the lower the premium will be.
The type of building. The construction of the premises is of great interest to your insurance provider as this may affect what happens to the building in the event of a fire for example.
What the building is used for. A standard small office will be at the lower end of the risk scale while a takeaway shop has more associated risks and will attract thus a higher premium.
Risk prevention. If you have spent money on items such as a sprinkler system this will lower your premiums as it will help limit any potential damage to the property.

Offices and surgeries

This type of cover tends to include a wide variety of features that can vary considerably from provider to provider so you need to examine the fine print.

Buildings and contents, public and employers' liability cover and property damage all tend to be compulsory covers on a standard office and surgeries policy but if you wanted to add less common features like terrorism, employee dishonesty and computer breakdown these would be an additional extra to your cover.

You also have the option to extend the excesses on certain policy features if you require. For example you may wish to bolt on business travel to keep you and your employees covered no matter where they might be working. You may also want to consider adding employee dishonesty cover that protects your firm against losses caused directly by theft, fraud or dishonesty committed by an employee.

When it comes to surgery insurance, whether you are a doctor, dentist or vet you will need to tailor-make your insurance to provide the right protection. The business needs of a clinic or surgery are clear very different to that of a standard shop or office as many surgeries by their very nature perform complex operations and keep valuable stock and high tech equipment. This means that you need a unique policy that covers the unique needs of your business and so it is worth sitting down with an intermediary to discuss your requirements in detail.

As there is so much choice in the market it is important when you are sourcing a policy to compare them on a like-for-like basis. Defaqto has noticed a trend starting to appear with a number of direct writers offering the most common SME insurance products, including office and surgeries insurance. While this route can work out cheaper it is not necessarily the best option. If you are considering purchasing your office and surgery insurance online then ensure you read the pros and cons of purchasing business insurance online guide within this section.

Did you know?

Legal expenses cover is not available to purchase from 16% of the market, which is surprising as this is an essential cover for your business.
There has been a slight increase in the number of products that include cover for subsidence on a standard basis.
The cover provided for employee’s personal effects show a marked increased in the levels of cover given compared with 2009. There has been a 10% increase in the number of products that provide a £1,000 benefit level.
There has been an increase of 9% in the number of policies providing an indemnity limit of £1,000 for the replacement of the locks at the premises.
The cover provided for business interruption at a supplier has seen a 3% increase in the number of policies that provide a £25,000 indemnity limit.
Cover for precious metals kept at the surgery has seen a 9% increase in policies with an indemnity limit of £2,000.

Retail / shop insurance

Shops come in all shapes and sizes, from large retail park units down to traditional high street stores. If you own a shop and require this type of insurance then there are certain precautions that you need to take to ensure that any potential accidents don’t turn into a major catastrophe.

When purchasing a shop insurance policy is a good idea to consider taking out the following cover:

Public liability insurance

This would cover you against any claim from a member of the public if they were to become injured or their property was damaged after coming into contact with your business.

Employers’ liability insurance

If you have staff working for you, you are required by law to have this insurance.

Shop building insurance

This non-essential cover will protect your premises if it were to become damaged by fire, flood or theft.

Shop stock and contents

Provides the same as above but in this instance it protects your stock rather than your premises.

Business interruption

How would you protect your lost income and continue trading if your business was required to shut down for a significant period of time? Business interruption would cover this lost income as well as any additional expenditure incurred while your business was out of action.

By law, if you own a shop you must carry a minimum amount of employers’ liability insurance; in addition the majority of businesses carry additional public liability coverage.

As you will have daily interaction with the general public you must factor this into any decisions you make about the level of cover that your business requires – as well as any exposure that it may face. It may help to sit down and make a list of any potential risks to your business and then sit down and discuss it with your insurance provider or intermediary.

Did you know?

Cover for the costs of tracing and accessing a leak has seen an increase of 5% in the number of policies that now provide cover.
There has been an increase of 15% for the number of policies that provide a maximum sum insured indemnity limit of ‘within the contents sum insured’, for the replacement of glass.
The maximum indemnity limits provided for business interruption cover have seen a 3% reduction in the number of polices that allow the policyholder to select the sum insured required.
Only 45% of policies provide policyholders with a 24-hour claims helpline. This shows that a staggering number of you would have to contact your intermediary or insurer to report the claim.

Tradesman insurance

The term tradesman covers a wide variety of professions including plumbers, electricians, carpenters, builders or decorators. Whatever job you might be in the last thing you want to be facing is an insurance claim for property damage or injury from an irate client.

One important cover that you require as a tradesman is public liability cover. This insurance covers any awards of damages given to a member of the public because of an injury or damage to their property caused by you or your business. It also covers any related legal fees, costs and expenses. The typical level of cover that you would need to take out would be to the value of at least £1m.

Personal accident cover is more relevant to a tradesman risk than to any other packaged policy and can include benefits against death, loss of limbs, permanent total disablement and temporary total disablement. The cover given is usually calculated and sold in ‘units’ for each benefit so that you can choose a maximum indemnity.

You also need to consider that without the relevant tools and equipment you would be unable to perform your job, which makes this a crucial element of your insurance cover. This means that you can have the peace of mind that they can be replaced with a minimum of disruption to your business activities if they were either lost, damaged or stolen. Remember that you can only buy tools cover as an add-on to a business insurance policy and that some policies only cover the tools in a vehicle overnight if the vehicle is locked in a garage.

Did you know?

There has been an increase of 6% in the number of policies providing a standard indemnity limit of £10,000 for stock in transit.
A legal helpline is an essential service that is needed by any business and this has been recognised by the industry, with 91% of policies providing a helpline.
There has been an increase of 6% in the number of policies that provide a £500,000 standard indemnity limit for legal expenses.
There has been an increase of 5% of policies that have a tools single article limit of £5,000.

Pros and cons of purchasing business insurance online

It is clear that attitudes are changing about the way insurance is purchase online and you may now feel comfortable with the idea of researching and purchasing your cover this way.

One of the key benefits of online business insurance is that you can research and purchase insurance cover at a time that suits you. If you have a small business you may not have the luxury of having a dedicated person to purely deal with your insurance needs or have the time to meet with an intermediary.

Being able to sit at a computer at 10 o’clock at night, typing in information at your own pace and being provided with a tailored quotation must be very attractive; particularly when this is compared with spending time dealing with an intermediary who is after your hard earned money. Subsequently you may end up feeling that you have not been provided with a valuable service.

Defaqto has looked at some of the pros and cons of purchasing business insurance online. These include:

Pros

24-hour access;
The ability to research and purchase cover outside of business hours;
Tailored cover and a reduction in premium for cover not needed;
Policy documentation available instantly;
Instant cover;
Access to business information through guides and articles;
0% direct debit fees;
Packaged cover available for various trades.

Cons

Advice is not available;
If you have a claims history or security issues your business might be difficult to place;
If you do not fit the ‘packaged’ product you may not be able to purchase cover online;
You could end up removing core cover and self insure to save money, without understanding the impact of this action;
Medium to larger businesses are not yet adequately catered for.

Checklist for buying commercial insurance

You may want to know how to save money on your cover but scrimping on your policy might be the biggest mistake you could ever make. What you must never do is lower you sum insured as you may find yourself in a situation where your business is not fully insured. However, you could follow the hints and tips below to help you get the correct level at the correct price.

Use an intermediary. They can recommend policies to you while searching the market to find you the best possible deal. Intermediaries can also offer a more personalised service.

Shop around. As this policy is hugely important you must ensure that you investigate a number of policies. You may want to do this online, direct or through an intermediary who can search the market for you.

Increase your excess. As most policies will come with a compulsory excess you could consider increasing this but you need to guarantee that you can pay the excess if you needed to make a claim.

Risk management. Many companies over look this important part of their coverage, however, if you have a good risk management programme then most insurance providers will reward you with a more affordable policy. You may want to investigate Business Continuity Management in more detail. This is a management process that provides a framework to ensure the resilience of your business and to help provide continuity of service to your customers. It provides a basis for planning to guarantee your long term ability to continue trading following a disruptive event. After all it is better to plan for an incident rather than being in panic mode if something bad happens to your business.

Product features. You need to sit down and make a list of all the features that are important to your business as some features will be compulsory and other non-compulsory but at the same time essential to your firm.

In order to help you to select the right commercial SME insurance Defaqto assess over 40 criteria when rating commercial insurance policies. Use our simple Star Ratings tool on the right to find the right commercial insurance product for your office, retail or tradesman insurance.