Small and medium sized businesses typically work with more limited resources and to tighter profit margins than larger companies, explained the chairman of the Federation of Small businesses in an interview with the Guardian newspaper on the 21st of March 2017.
That calls for closer and more careful management of overhead costs – not least of which is the business insurance which safeguards not only the assets of the enterprise, but also its very existence.
Why is business insurance so important?
The importance of business insurance is probably best illustrated by taking a look at the wide range of risks which it protects.
As any specialist provider is likely to tell you, business insurance needs to be sufficiently broad-based and flexible to be tailored to meeting the needs of a huge range of different types of enterprise.
Nevertheless, the following broad elements of insurance are typically considered important:
Business equipment and premises
- from wherever you are trading – even if it an office in your own home, and whether you own the premises or lease them – you are likely to depend on equipment, appliances, plant or machinery, not to mention the stock and any work in progress;
- business insurance is designed to protect this investment;
- if you own the premises from which you are trading, business insurance is also an important defence against risks – such as fire, flooding or subsidence – which may threaten the structural integrity of the building or even lead to its complete loss;
- if you are buying your business premises with the help of a mortgage, the lender is almost certain to insist that you have sufficient building insurance to cover the outstanding loan;
Employers’ liability insurance
- if an employee of yours suffers an accident at work or contracts a longer-term medical condition related to the job they are doing for you, you may be held liable as their employer;
- so that there is certainty in your being able to meet such claims – which may be substantial – the law requires that you hold a minimum of £5 million employers’ liability insurance;
Public liability insurance
- your potential liability towards members of the public – including your customers, suppliers, passersby and neighbours – may also bring substantial claims if any one of them is injured or has their own property damaged through some contact with your business and its activities;
- once again, claims may be substantial and it is usual for any business to have at least £1 million of public liability insurance – and often a lot more;
Professional liability insurance
- if your business involves giving professional advice of any type to your clients, there is always the risk of your misjudgement, miscalculation or some other error, for which a client who suffers financial loss as a result may hold you liable;
- some professions, such as accountants, lawyers and architects, for example, make adequate professional liability insurance a condition of your membership of the relevant professional body.
Business insurance may not be a legal requirement – with the exception of employers’ liability insurance – but it is clearly a prudent way of protecting your business in a highly competitive marketplace.