There is no legal requirement to take out any kind of business insurance when you set up a UK limited company. However, you must be appropriately insured if any of the following apply:
Depending on the nature of your business and your own specific needs, you may require several types of cover.
It is common for many insurers to provide different types of business insurance under one policy, which is a great way to get a good deal. Some of these policies can be rather costly, particularly if purchased separately, but lack of appropriate cover could be detrimental.
We recommend that you seek professional advice from a reputable insurance broker before you register a company or purchase any business insurance policies.
If you plan to hire any employees and/or sub-contractors other than yourself and your family members, you are legally required to take out Employers’ Liability insurance. This will protect your business and your employees in the event of any work-related injury, illness or disease whilst on or off site. This type of insurance is compulsory under the Employers’ Liability (Compulsory Insurance) Act 1969, even if you only hire occasional or temporary staff.
Nowadays it is very easy for employees to access ‘no win no fee’ legal services to claim compensation from their employers. This increases the likelihood of many companies experiencing employers’ liability claims for accidents or illnesses. The potential costs of legal representation, let alone paying compensation to successful claimants, could severely damage your company.
Employers’ liability insurance covers the following:
This type of business insurance allows employers to meet compensation costs and any associated legal fees and expenses for injuries or illness suffered by an employee in the course of their employment. It does not, however, extend to injuries or illness caused by a road traffic accident while an employee is working – this type of claim should be covered by vehicle insurance.
This type of insurance is not required in the following circumstances:
The minimum level of employers’ liability cover is £5 million, but the majority of reputable insurance companies will provide a minimum cover of £10 million. The cost of your insurance premium will be based on the number of employees you have, the type of business you run, the types of activities carried out by employees, and your previous claims history.
It is essential that you carry out an appropriate and thorough risk assessment in the workplace and ensure health and safety requirements are maintained at all times. Failure to do so may result in your insurer reclaiming the cost of any compensation that is paid out to your employees.
You must ensure that you purchase Employers’ Liability insurance from an authorised insurer working under the terms of the Financial Services and Markets Act 2000 . You can buy this cover directly from insurers or through intermediaries, such as specialist brokers or trade associations. The Financial Conduct Authority (FCA) and the British Insurance Broker’s Association (BIBA) are reliable places to source authorised, regulated insurers.
To enable insurers to work out your public liability policy, you will have to provide a number of details about your company, including:
Failure to take out proper insurance can lead to a fine of £2,500 for every day without appropriate cover.
You will be required by law to display your Employers’ Liability certificate in a prominent and accessible location and make it available to Health and Safety inspectors upon request. All insurance certificates, valid and out-of-date, should be retained for at least 40 years.
The cost of Employers’ Liability insurance varies considerably. It will depend on many factors, such as the size of your company, the number of employees you have and the nature of the work they carry out, where employees work and the length of time you have been trading. Premiums will be lower if you only have one or two employees and the nature of their work is low risk. Premiums will be higher when you employ more people who carry out higher risk activities or work in an environment that poses more risk to their well-being.
Prices range from as little as a few pounds a month for small, low-risk businesses with only one or two directors and/or employees. Your premiums will rise significantly if you have lots of employees who work in high-risk industries like construction, electrical engineering, gas installation, etc.
You can usually add multiple extras like Public Liability, Personal Indemnity etc., for just a few additional pounds per month. It is far more cost-efficient to buy your various types of cover as a bundle package and most insurers will present these options to you during the application stage.
To find the best policy for your company, you can compare Employers’ Liability insurance online with Simply Business.
Professional Indemnity insurance is often referred to as Professional Liability insurance or PI insurance. You should consider taking out Professional Indemnity insurance if you provide advice or professional services to individuals and other companies, or you handle data and Intellectual Property belonging to other people.
This type of business insurance will protect you if a client brings a compensation claim against you for negligence, unsatisfactory work or financial loss. It will cover your legal costs and any compensation you may be required to pay to a client.
A number of professions require their members to be appropriately insured to act in their qualified capacity. If you work in a profession that is regulated by a governing body, or you are a member of a trade association, you must determine whether or not you are legally obliged to take out professional indemnity insurance.
The types of professionals for whom PI is compulsory include:
PI insurance is also highly recommend for the following professions:
Professional indemnity insurance can protect you from legal claims by clients who are unhappy with your products, your professional advice or the work you have carried out, including:
PI policies vary considerably, so it is essential to check the particulars of your chosen policy to ensure it covers all potential risks associated with the work you do.
Most policies provide cover from £50,000 – £5 million, which will be suitable for many types and sizes of companies, but higher cover is available. The level of PI cover required will depend on various factors:
In many cases, clients will specify the level of cover required. If they do not, you should find out what their expectations are before entering into any formal agreement. This will protect both you and your client.
PI insurance can be arranged in one of two ways: an ‘aggregate’ basis or an ‘any one claim’ basis. It is important to understand the difference between these two types of cover before choosing a policy.
The cost of Public Indemnity insurance varies considerably between professions, because premiums are determined by a multitude of variables, including size and value of contacts, number of clients and their turnover, and the size of any potential claims. The higher the potential liability claims, the higher the premium. However, cheap PI insurance does exist.
You could pay less than £10 a month if you only work with a few small clients and your contracts are low value. If you are a marketing or IT consultant with an annual turnover under £50,000, for example, you could pay around £150/year for your PI insurance. A select few insurers can offer this type of low-cost insurance even if your income and potential liability is much higher, so it really is worth shopping around. Low cost does not always mean poor cover.
Most insurers will allow you to add multiple types of cover like Employers’ Liability and Public Liability insurance for just a few additional pounds per month. This is far more cost-efficient than buying each type of cover separately.
To find the best policy for your company, you can compare Professional Indemnity quotes online with Simply Business.
Public liability insurance is essential if your business premises or activities could cause injury to members of the public or damage someone else’s property. ‘Public’ means anyone who is not an employee. This type of insurance will cover you for claims brought against your company by any member of the public, in addition to the cost of legal representation and related expenses.
Many types of companies, organisations, and self-employed individuals require public liability insurance, including:
If there is even the slightest chance that a person could be injured on your business premises or as a result of your products or services, or you could damage something that belongs to someone else, it is imperative that you take out this type of business insurance.
If you attend organised events to promote and sell your products, you may find that the organisers or venue specify the need for public liability insurance because you will be coming into direct contact with members of the public and other companies. Even something as simple as spilling a cup of coffee on another vendor’s laptop could lead to a claim against your business.
PLEASE NOTE: This type of business insurance does not cover employees, temporary staff, or individuals on work placements. You will need Employers’ Liability to protect your company from any claims made by such individuals.
A typical policy will pay for the cost of rectifying any damage caused in connection with your business, covering the cost of injury to any members of the public, paying compensation awarded to claimants, and taking care of the potentially crippling cost of legal representation and related expenses.
You will need a higher level of cover if your company occupies a premises that is frequently visited by members of the public, or you operate a high risk business. If you sell products online and at organised events, or you work from home and are unlikely to receive visits from clients or members of the public, your level of cover will be lower because you present less risk.
Most public liability policies start at £1 million. In many cases, it is up to the individual company owner to choose the most appropriate level of cover; however, some companies are contractually obliged to take out a certain level of cover.
To enable insurers to work your public liability policy, you will have to provide a number of details about your company, including:
You will find that many insurers offer public liability in a bundle package with Employers’ Liability and Professional Indemnity insurance because these are commonly purchased together. You could save a great deal of money by purchasing multiple policies together from the one insurer, so do try and buy all of your business insurance at the same time.
The price of your premium will depend on many factors, as mentioned above. Small, low-risk businesses will pay far less for PL cover than their larger, high-risk counterparts. This is simply because they less likely to cause damage and injury from their business activities.
If you are the sole director and employee of a home-based company, and you have not made any previous claims, your company and its premises will be considered low risk and you could get basic Public Liability insurance from as little as £5 per month.
If you own a large construction company and have multiple employees carrying out high-risk activities, you will need much higher liability cover. Your monthly premium will be a little more expensive because the likelihood and cost of potential damages and injury is far greater in this type of industry. However, you can still find affordable insurance from around £15 per month, give or take.
To find the best policy for your company, you can compare public liability insurance quotes online with Confused.com.
If you own or rent any property for business purposes, you should take out commercial property insurance to cover the cost of repairing or rebuilding the premises, or replacing stock and equipment. This type of insurance falls into two main categories: buildings insurance and contents insurance.
This type of cover is not required by law but mortgage providers will insist that you have a policy in place before giving you a loan. Even if you own your property outright, you should still take out buildings insurance to cover the cost of repairing or rebuilding your business premises if it is damaged or destroyed due to fire, flooding, burst pipes, falling trees, storms, riots, subsidence theft and other forms of damage. However, the majority of building insurance policies will not cover the general wear and tear and acts of war or terrorism.
There are different types of insurance for different types of premises – shops, pubs, offices, etc – but you can also get also general commercial property cover that is suitable for all types of premises. If you own a premises that is currently not in use, you should consider unoccupied property insurance instead.
PLEASE NOTE: This type of cover will only be necessary if you or your company owns the property – otherwise, it is the responsibility of your landlord.
Contents insurance is necessary, regardless of whether you own or rent your business premises. Landlords are not responsible for insuring any property or assets that belong to you or your business.
This will cover the cost of replacing stock and equipment if it is damaged or stolen, but do check for exclusions to make sure the policy is adequate. You do not want a policy that provides you with only partial cover and protection.
You may also wish to add cover for fixtures and fittings and any stock you keep at your premises. It is important to insure your stock against its cost price, not its sale price, and make sure you include everything that could possibly be damaged and leave you out of pocket.
If you run your business from home, your standard contents insurance may not be sufficient to cover your company’s items. In such instances, you must be honest with your insurer because your policy will probably have to be amended or replaced.
If you plan to take company items away from your usual premises (your laptop, materials, equipment, stock, etc), make sure your policy covers your belongings in these circumstances, too.
You may also wish to consider Business Interruption insurance on top of your buildings and contents insurance. If you are unable to trade as usual due to damage being caused to your premises or equipment, this insurance will cover any shortfall in pre-tax income, increased running costs and legal expenses.
Most insurers will require you to adhere to minimum security standards for the insurance to remain valid, including:
You may be able to reduce your premium if you take additional security measures by installing an alarm system, additional locks, CCTV or a 24-hour security guard.
If you need both types of cover, you will usually find the best deals by purchasing buildings and contents insurance together. Further savings can be made if you add on other types of insurance at the same time under the one policy, rather than taking out multiple types of cover separately.
Commercial buildings insurance premiums range from a couple of hundred pounds per year to thousands of pounds per year. The cost depends on the type and size of premises you are insuring, its purpose and usage, where it is situated, and the stability and security of the building.
Commercial contents is usually a lot cheaper, especially for really small businesses that do not need commercial buildings insurance. You could protect your company items from as little as £15 per year. If you simply need to alter your current home contents insurance to add cover for your stock and equipment, your premium will only rise by a few pounds, but if you require this type of cover for business items in a designated business premises, your premium will be higher.
It will become increasingly more expensive if you need to insure larger quantities of items or high-value stock and equipment, so your premiums could rise to hundreds of pounds per year.
Unlike standard home contents insurance, it is impossible to provide average costs for these types of insurance policies (within the scope of a blog, that is) because there are too many significant variables at play. However, you can compare commercial property insurance quotes online with Money.co.uk.
If you have any vehicles that are used for commercial purposes, whether wholly or partly, you must take out appropriate cover. The type of insurance policy you choose will depend on who owns the vehicle (you or your company), who drives the vehicle (you, your spouse and/or employees), and how the vehicle is used.
Standard vehicle insurance typically covers only personal use, whilst some policies include automatic cover for commuting to and from work. However, if your vehicle is going to be used extensively or exclusively for business purposes, and/or used by employees, your insurance must be tailored appropriately.
If any vehicle is owned by your company (it is registered in your company name, not yours), it is classed as a company car; therefore, standard car insurance and company car insurance will not suffice. Such vehicles must be insured through your company.
Vehicle insurance is not as clear cut as other types of insurance, because there are so many variables to consider that can affect the type of insurance and cover required.
The best advice is to speak to your current vehicle insurer in the first instance (if applicable), or do a comparison search online and enter the specific usage details of your car or commercial van to find the most relevant policies and levels of cover. In most cases, however, you can expect your commercial vehicle insurance to cover some or all of the following:
In general, vehicle insurance is extortionate, so you can imagine the cost of insuring a vehicle for business use. Average van insurance for people below 30 is usually around the £1,000-£2,500 per year mark but there are some online insurers offering cover from as little as £195/year.
Average car insurance is around £600 per year, but you will pay significantly less if you are above the age of 25 and have a good driving record, the car is small and equipped with good security, and the use of the vehicle is deemed low risk.
As the director of a limited company, you may wish to protect yourself (and other directors and company officers) against potential claims caused by decisions or actions taken within the scope of your regular duties. Whilst many people assume limited liability will protect them as directors, this is not the case if someone pursues you personally.
Limited liability only protects a company and the personal assets of its owners if the business is unable to meet its financial obligations.
Claims can be made against you or other directors, officers, managers and key employees as individuals – rather than the company itself – by shareholders and fellow directors, creditors and investors, suppliers and service providers, employees, regulatory bodies and other third parties.
D&O insurance will enable you to cover the cost of defending yourself against any such claims, in addition to any final settlement or compensation award.
You can find very competitive D&O quotes by carrying out an online search. Comparison websites do not tend to cover this type of insurance. Your policy will be based on various factors like the number of directors and officers in the company, the number of employees you have and the type of business you run.
D&O premiums are based on many variables, including: the number of directors, officers and senior staff members your company has; the types of activities they carry out; and the turnover and financial strength of the company. However, you should expect to pay between £130 – £400 per year for Directors’ and Officers’ Insurance.
If you are unable to work due to illness or injury, Income Protection insurance will protect you against loss of earnings until you are able to commence work, you reach retirement age, the policy comes to an end or you die – whichever is sooner. Short-term IP policies are also available for a lower monthly premium. Income Protection insurance is worth considering if you are the sole provider in your household and the loss of work would leave you unable to pay your bills and support yourself and your family.
There are three main areas of Income Protection insurance cover you can choose from:
Income protection insurance will enable you to protect up to 70% of your gross monthly earnings if you are unable to work. It will pay out a tax-free sum on a monthly basis from one to 75 years, although most insurers will only provide cover up to the retirement age of 70.
Short-term policies provide cover for a fixed period of time, generally between two and five years. This type of insurance is also known as Accident, Sickness and Unemployment (ASU) insurance. The most common ASU policies are Payment Protection and Mortgage Payment Protection Insurance.
Payment Protection is designed to cover the cost of a particular financial obligation and prevent you from defaulting on your agreed payments; however, many policies do not have to cover a specific debt, which means you can use the funds in any way you like until you are able to commence work.
Mortgage Payment Protection will cover the cost of your mortgage payments for a certain amount of time.
Long-term Income Protection policies will provide you with cover if you are unable to work for an indefinite period of time due to illness or injury. Unlike most short-term Income Protection policies, however, this type of insurance will generally not cover you if you are made unemployed or redundant. When choosing long-term income protection cover, make sure you know exactly which kind of plan you are buying because there are commonly two types:
The best policies are those which pay out if you are unable to do your own job. Naturally, these premiums are more expensive.
If you claim on an Income Protection policy, there is a waiting period before the payments start. This is known as the ‘deferred period’ and it can range from one day to up to 104 weeks. You can usually choose how long you want this to be, but a longer deferred period will enable you to reduce the cost of premiums. If you have significant savings, are eligible for state benefits, or your partner or family is able to support you for a certain amount of time, it may be worth choosing a longer deferred period to reduce the cost of your premium.
It is important that you do not underestimate the amount of income you need simply to keep your premiums low, but you will not be allowed to insure for more than your gross salary. No insurance provider is going to allow you to make a profit from your own misfortune.
Think carefully and realistically about the amount of money you need every month to get by. If you are considering long-term cover, rather than short-term cover for a specific debt, you must take into account all essential monthly commitments, even if they seem small and insignificant.
Your monthly premium will depend on a number of factors: Your age and gender; the type of work you do; the percentage of income you would like covered; whether or not you smoke; and the state of your current health, including any existing health problems you may have. You must be honest with your insurer, otherwise, your policy will be invalid if you are found to have provided false information.
You can get Income Protection insurance from as little as £3 per month. On average, however, it will cost you around £15-£50 a month for an ‘own occupation’ policy that pays out £1,000-£1,500 per month after a 4-week deferred period.
To find the best policy, you can compare Income Protection insurance quotes online with GoCompare.