Published May 22nd, 2017 by

The Startup Business Guide to Insurance

The startup business guide to insuranceInsurance is important for every new business. If you’ve just launched your startup it’s vital that you understand exactly what kind of insurance you need and how it will benefit you. While it can seem like an unnecessary expense, insurance is there to protect you if anything goes wrong, so it can be completely invaluable.

The needs of each business is different, so you need to consider the risks that yours faces and get the appropriate insurance.

Here is our guide to the most common forms of insurance that startups need.

Employer’s liability insurance

There is only one piece of insurance that is mandatory for any business that has employees; employer’s liability insurance. This form of insurance covers you in the event of injury and damage claims brought against you by a member of staff. For example, if one of your employees slips over on a wet surface and breaks their arm, they can go to personal injury lawyers who will then attempt to bring a claim against you. As soon as you employ someone you must have an employer’s liability insurance that covers you for at least £5 million.

It should be noted that you might not need to have this kind of insurance if you only employ a family member or someone who is based abroad. However, if you are not properly insured you can face a fine of up to £2,500 per day, so make sure that you take out the correct policy from an authorised insurer.

Building insurance

If your startup owns or is buying its own business premises, then you should really consider getting building insurance. If you’re only renting then this isn’t something you need to worry about as your landlord should have the insurance covered, but if the premises are yours then you will be the only one responsible for the building.

You should note that you need to be very careful if you are an entrepreneur whose business is based in their home. You need to check through your current home insurance documents, as many standard policies do not cover business activities. If this is the case you may need to take out separate insurance to ensure that you are covered, or change your home insurance policy completely. It might seem like a hassle, but you really don’t want to be in the position where policy small-print makes it impossible for you to make a claim and leaves you with an enormous bill.

Contents insurance

This is another area in which startups need to be careful. If you are going to be renting your business premises you should know that while the landlord will cover the building insurance, you’ll need to have your own contents insurance. Just as with your home, it’s not a legal requirement to have this kind of insurance, but you would certainly miss it if you needed it.

Once again, there is a warning here for those who use their home as the base for their startup. As with your building insurance, your home contents insurance may not cover expensive business equipment. This can make it essential that you need to take out a specialist policy to cover any professional tools, computers or other equipment that may be based at your home.

Professional indemnity insurance

Depending on your situation and what your startup does, you may wish to consider taking out a professional indemnity insurance policy. This type of insurance is designed to protect your business in the case that a client believes you have made a mistake or provided advice that has cost their business money. It’s generally required by business that sell skills, knowledge or services, rather than those that sell physical products.

The policies can cover you in the event of issues such as errors, negligence, unintentional breach of confidence and more. It may be the case that a client will refuse to give you the contract to work for them unless you have indemnity insurance, and some professional bodies will not accept you as a member without it, so it may become a necessity.

Product liability insurance

On the other hand, if your business creates physical products that it may be the case that you need product liability insurance. If you sell a product that causes an injury or illness to a member of the public you could face a huge compensation claim. Product liability insurance protects you against these claims, including all of your legal costs. It’s not a legal requirement, but it is hugely valuable.

Public liability insurance

This form of liability insurance is relevant if your startup has any contact with the public. This could be if you have customers come to your premises (for example, if you own a shop) or because you carry out work in public areas. It means that your business will be protected if someone gets injured or their property is damaged and they bring a compensation claim against you.

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