Only two types of business insurance are compulsory: Employer’s liability cover and motor insurance (for vehicles intended for business use). There are many other kinds of policies that are optional, but advisable.

In this article we covers the most common forms of business insurance which can be purchased through a broker, or direct from an insurance company or bank. Finding the right provider for your business is simply a case of shopping around: Look on the Internet, in the phone book and on the high street or take a look at our list of links to insurers and brokers offering business and commercial insurance(www.uknetguide.co.uk/Finance/Insurance/Commercial_Insurance.html). Always compare several quotes; never settle for the first one you are offered.

Employer’s Liability Cover

Even if your workforce is made up of only one person, you are legally obliged to have employer’s liability insurance. This covers you to meet claims for sickness and accidents suffered by members of staff while in the workplace. If you are a director of a limited company you will also be classified as an employee, so by purchasing cover you are protecting yourself as well as your staff.

The statutory minimum level of cover is £5m. You must display your certificate of employer’s liability in all your business premises. Once the certificate has expired, you must keep hold of it in case past employees take action against your firm.

Motor Insurance

Motor insurance is the other compulsory form of cover for a business with vehicles that are used on roads and in public places. This, of course, applies to the firm’s vehicles, not staff members’ private transport.

Third party is the minimum level of necessary cover, which will insure against the costs of damage to another driver’s vehicle.

Public Liability Cover

No business should ever operate without adequate public liability cover. It is designed to protect owners and operators of businesses from a wide variety of claims including those arising from death or injury to visitors to your premises and damage to a neighbouring building by a fire that started on your property. The amount of cover required depends on the nature of the business and is usually at least £1m.

Product Liability Cover

This will protect you against claims by people other than your employees for injury or physical damage caused by products made, sold or repaired by your business.

The Consumer Protection Act 1987 placed a greater onus on businesses dealing directly with the public. Proof of negligence is no longer required. The very fact that a product causes injury is enough to place the blame on the supplier

Property Insurance

This kind of cover offers protection against physical damage to, or loss of, the premises in which your business operates and the equipment and stock kept there. The building should be insured for the full cost of rebuilding, site clearance and all relevant professional fees – such as surveying and legal bills. You may also wish to consider insuring your goods when in transit.

Loss of Profits - Consequential Loss

Linked to insurance for property is insurance for your profits, which could suffer if your firm had to reduce or even cease trading in the immediate period following a fire or theft. The insurer pays for loss of gross profit as a result of reduction in turnover. You should take into account a dependency on particular suppliers or customers who would seriously affect your business should they suddenly be unable to operate. You also need to think about how long it would take to rebuild your turnover to its original level.

Directors’ and Officers’ Liability

Your company can buy directors’ and officers’ liability cover to protect the personal assets of directors and executive officers and to meet their legal costs. The policy will reimburse the individual for personal liability arising out of a “wrongful act.” Or it can compensate the company itself, where it has reimbursed a director or officer for a personal liability arising out of a wrongful act.

Professional Indemnity

This protects advisers such as management consultants, lawyers and accountants against legal costs and damages arising out of advice or recommendations given in their professional capacity.

Legal Expenses

Such a policy is for protecting your business against the costs of bringing or defending a legal action, and is complementary to employer, product and public liability and professional indemnity insurance.

It will usually cover legal and other costs incurred in actions brought by the Inland Revenue and Customs and Excise, employment disputes, contractual claims and alleged breaches of “fiduciary duty”.

Packaging Your Policies

You needn’t buy separate policies to cover the many and varied possible risks of running a business. You can opt for a package that bundles cover together in one, specially tailored, easy-to-administer policy – usually at a lower price than buying the same covers separately. However, as your business grows, your insurance needs could change, meaning a packaged policy may not be the best solution.

Saving Money

Shopping for the best value policy is, of course, the first step. Under-insurance will result in a proportionate reduction in an insurance claim and could damage the ability of your business to trade, or even put its future at risk. Over-valuation and insuring for risks you do not face will mean wasted premiums.

Your insurance company may offer a no-claims discount, so improving security and fire prevention methods could be another way of keeping down insurance costs. Settling on a high excess will mean a reduction in premiums – which is useful only if your business can bear a significant loss.