Business essentials
Business insurance: compulsory and optional cover
Start with what the law requires. Then look at the losses your business could struggle to absorb.
Three different reasons to need cover
A policy may be required by law, required by a regulator or contract, or chosen because the financial risk is too large to carry yourself. Keep those reasons separate when deciding what to buy.
Insurance that can be legally compulsory
Employers’ liability
In Great Britain, most employers must have employers’ liability insurance with at least £5 million of cover from an authorised insurer. It responds to liability for employees’ work-related injury or illness. Make the certificate accessible to employees and available for inspection. See GOV.UK’s requirements.
Exemptions need care. The family-business exemption does not generally cover incorporated limited companies. A company employing only its owner may be exempt where that employee owns at least 50% of its issued share capital. Calling someone a contractor does not by itself settle their position. Check the HSE guide for employers. Northern Ireland has separate legislation and guidance through HSENI.
Motor insurance
Using a vehicle on a road or in a public place normally requires at least third-party motor cover. The policy must cover the actual use: personal or commuting cover may not cover customer visits, deliveries or other business journeys. Check drivers and uses with the insurer. See GOV.UK vehicle insurance.
Cover required by a profession or a contract
Some regulated professions must maintain specified professional indemnity cover under their professional rules. Client contracts, funding agreements, licences and leases can also require cover and minimum limits.
Public liability insurance is not a universal statutory requirement for every UK business, but an event organiser or customer may insist on it before you start work. Buildings insurance may be required by a lender or lease. Read those requirements before quoting: the cost of complying belongs in your commercial decision.
Check your own regulator’s rules and use the government’s business insurance guidance as a starting point.
Optional insurance worth considering
“Optional” does not mean unimportant. Consider the likelihood of a loss, how severe it could be and how much you could fund yourself.
| Cover | Risk to discuss |
|---|---|
| Public liability | Claims by third parties for injury or property damage arising from business activities. |
| Product liability | Injury or damage linked to products you supply, manufacture or import. |
| Professional indemnity | Client losses arising from covered professional errors or negligent advice. |
| Property, stock and equipment | Damage or loss affecting premises, stock, tools and essential equipment. |
| Business interruption | Loss of income or extra costs after an insured event. Triggers, exclusions and the indemnity period matter. |
| Cyber | Specified incident-response costs, disruption and liabilities. Check security conditions and exclusions. |
| Trade credit | Covered losses when business customers fail to pay. Read our trade credit insurance guide. |
| Legal expenses | Specified legal disputes, subject to exclusions, prospects-of-success tests and notification conditions. |
| Key person protection | The financial impact of losing a crucial person through covered death or illness. |
Sources: ABI guidance on public liability, professional indemnity and business insurance. Policy wording determines what is actually insured.
A practical insurance review
- Map your exposures. Think about employees, visitors, vehicles, advice, products, premises, data and unpaid invoices.
- Check obligations. Read legal, regulatory, lease and customer requirements.
- Choose realistic limits. Discuss maximum plausible losses and the effect of underinsurance. Rebuilding cost is different from a property’s sale value.
- Read beyond the headline. Compare excesses, exclusions, territorial limits, notification rules and overlapping policies.
- Plan for claims. Understand what evidence to keep and when to notify. For claims-made cover, ask about retroactive dates and run-off protection when changing insurer or closing.
- Review when trading changes. Tell your adviser about new services, staffing, countries, vehicles, premises or substantially larger contracts.
Common questions
I work alone. Do I need any insurance?
You may have no employers’ liability obligation, but business motor use, professional rules or contracts may still require insurance. Consider the risks to clients, the public, your equipment and your income as well.
Will my home insurance cover my business?
Do not assume it does. Explain your work, visitors, stock and equipment to the insurer. Business use can affect the cover you already have.
Does a limited company protect me enough?
Limited liability does not pay the company’s legal defence costs, replace lost assets or keep wages funded after a major loss. Insurance decisions should reflect the business’s exposures and obligations.
General information, not an individual recommendation or a complete list of every trade’s insurance duties. Discuss suitability with an authorised insurer or broker and check the Financial Services Register.