Running a small business involves risks that personal insurance policies may not cover.
A customer could be injured at business premises, an employee might become ill because of their work, equipment could be stolen, or a cyber incident could interrupt trading. The appropriate insurance will depend on the business's activities, employees, premises, vehicles and contractual responsibilities.
Not every business needs every type of cover. In most cases, only employers' liability insurance and motor insurance are compulsory, although exemptions and specific circumstances can apply. Other policies may be required by a client, landlord, professional body or industry regulator.
Here are nine types of insurance that UK small businesses may need to consider.
Employers' liability insurance can help meet compensation and legal costs if an employee becomes injured or ill because of the work they perform.
Most UK businesses must arrange this cover as soon as they become an employer. The policy must normally provide at least £5 million of cover and be issued by an authorised insurer.
The requirement can apply to permanent, part-time and temporary employees. Whether cover is compulsory can depend on the working relationship rather than simply whether someone is described as self-employed.
Limited exemptions exist, including in certain businesses where the only employees are close family members or where a company has only one employee who owns at least half of its share capital. Businesses should confirm whether an exemption genuinely applies rather than assuming they do not need cover.
A company that should hold employers' liability insurance may face penalties if it operates without it or fails to make its certificate available as required.
Businesses that may need it: Almost any company employing staff.
Public liability insurance is intended to protect a business against claims involving injury to members of the public or damage to property arising from its activities.
For example, a customer might trip over equipment, a tradesperson could accidentally damage a client's property, or work performed by the business might cause an injury.
Public liability insurance is not generally a legal requirement. However, clients, local authorities, trade bodies and venue operators may insist on a minimum level of cover before allowing a business to undertake work.
The policy limit should reflect the scale of the risks involved. A consultant working mainly from home may face different exposures from a builder, event organiser or retailer receiving customers on its premises.
Businesses should check whether the policy covers work away from their main address, subcontractors, temporary locations and the specific services they provide.
Businesses that may need it: Tradespeople, retailers, hospitality businesses, event companies and anyone dealing with customers or working at client premises.
Professional indemnity insurance can help protect a business when a client claims that professional advice, designs or services caused them a financial loss. Claims might involve:
The policy may help meet legal defence costs and compensation, subject to its terms and exclusions.
Professional indemnity cover is not compulsory for every business. However, it may be required by a professional regulator, membership body or client contract.
Businesses should pay attention to whether the policy operates on a claims-made basis. This generally means the policy needs to be active when the claim is made, rather than only when the original work was performed. Businesses closing or changing insurers may therefore need to consider run-off or retroactive cover.
Businesses that may need it: Consultants, accountants, designers, technology companies, marketing agencies and other businesses providing professional services or advice.
Vehicles used for business purposes must have appropriate motor insurance.
A standard personal policy may not cover all forms of business use. Business owners and employees should check whether the policy allows the vehicle to be used for activities such as visiting clients, carrying tools, making deliveries or travelling between different work locations.
Government business guidance states that motor insurance is legally required when vehicles are used in a business, including where a personal vehicle is used for business purposes.
Businesses operating several vehicles may consider fleet insurance rather than arranging separate policies. A fleet policy can place multiple vehicles under one renewal date, although eligibility, permitted drivers and minimum vehicle numbers differ between providers.
Employers should also manage occupational road risks involving company vehicles and employees' own vehicles used for work. The Health and Safety Executive describes privately owned vehicles used for work as part of the "grey fleet".
Businesses that may need it: Couriers, tradespeople, taxi operators, delivery companies, sales teams and businesses running multiple vehicles.
Commercial property insurance can protect premises and physical business assets against risks such as fire, flooding, storms, theft and malicious damage.
Buildings insurance may be relevant when the business owns its premises. A tenant may instead be responsible for insuring improvements, fixtures, stock, contents or equipment, depending on the lease.
Cover can potentially include:
The amount insured should reflect appropriate rebuilding or replacement costs rather than simply the market value of the property.
Businesses operating from home should also check their household policy. A personal home policy may restrict business visitors, stock, specialist equipment or commercial activities. Government guidance advises businesses to update existing home or motor policies when assets are used for business purposes.
Businesses that may need it: Shops, offices, workshops, manufacturers, hospitality businesses and home-based companies holding business equipment or stock.
Product liability insurance may help when a product supplied, manufactured, repaired or distributed by a business causes injury or property damage. A claim could arise from:
A business does not necessarily need to manufacture the entire product to face a claim. Importers, wholesalers, retailers and companies selling products under their own name can also be exposed.
Product liability cover is often included with public liability insurance, but businesses should not assume this automatically. They should check the territorial limits, types of products covered, annual turnover declarations and any exclusions applying to imported goods or products sold in particular countries.
Businesses should also maintain supplier records, quality-control procedures and batch information where relevant.
Businesses that may need it: Manufacturers, online retailers, wholesalers, food businesses, importers and companies repairing or modifying products.
Cyber insurance can help a business respond to events involving computer systems, digital services and personal information. Potential incidents include:
Policies may provide access to technical, legal, forensic, public-relations and incident-response specialists. The precise support varies considerably between insurers.
Cyber insurance should complement rather than replace basic security. Insurers may expect controls such as multi-factor authentication, software updates, staff training, secure backups and access management.
Businesses should answer proposal questions accurately. A claim may be affected if a company states that a security control is in place when it is not consistently used.
Cyber cover can be relevant even to small companies. Any business relying on email, cloud software, online payments, stored customer details or connected systems may face digital risks.
Businesses that may need it: Online retailers, professional firms, healthcare providers, technology companies and businesses holding customer or employee data.
Business interruption insurance can help replace lost income or meet certain continuing costs when insured damage prevents a business from trading normally.
It is commonly linked to an insured event under a property policy, such as a fire or flood affecting business premises.
Depending on the policy, cover may contribute towards:
The indemnity period determines how long the policy may provide support. Businesses should select a period that reflects how long it could realistically take to repair premises, replace machinery, obtain permissions and recover customers.
Owners should also understand the events that trigger the policy. Business interruption insurance does not cover every reason a company might lose revenue. The wording, definitions and extensions are critical, as highlighted by the extensive disputes and legal clarification concerning some pandemic-related business interruption policies.
Businesses that may need it: Companies that would struggle financially if damage prevented them from operating for weeks or months.
Tools, equipment and stock may represent a substantial proportion of a small business's assets. Relevant cover can protect items such as:
Businesses should check where the items are covered. Some policies protect equipment only at the insured premises, while others extend to items in transit, at temporary locations or inside locked vehicles.
Vehicle-related conditions can be particularly important. An insurer may require tools to be hidden, stored in a secure compartment or removed overnight. There may also be individual-item limits or restrictions applying to theft without evidence of forced entry.
The insured value should reflect the cost of replacing the assets rather than their accounting or second-hand value, unless the policy specifies otherwise.
Businesses that may need it: Tradespeople, photographers, mobile professionals, retailers, manufacturers and companies carrying equipment between locations.
For many UK businesses, the two main compulsory forms of cover are:
Other insurance may become effectively compulsory through:
The absence of a general legal requirement does not mean a policy is unnecessary. The decision should be based on the financial consequences of a loss and the business's ability to meet a claim or recover from disruption.
A useful starting point is to identify:
The FCA notes that insurance brokers can help small and medium-sized businesses arrange cover, particularly where their requirements are complex. Businesses should still understand what service the broker provides and check that the recommended policy reflects their needs.
SimplyQuote is a UK insurance comparison website covering personal, commercial and specialist insurance.
Founded by Chris Richards and operated by Simply Quote Comparison Ltd, the website includes comparison routes for business products such as:
The exact products, insurers and intermediaries involved may differ between quotation journeys.
SimplyQuote does not underwrite the resulting policies. Its role is to help customers explore comparison routes or connect with participating insurers, brokers and commercial partners.
Small businesses should check the insurer, policy wording, limits, excesses and exclusions before purchasing. A broad policy name such as "business insurance" does not mean that every relevant risk is automatically included.
