What does Business Liability Insurance cover?
Business liability cover is designed to protect your business from financial losses and risks in the course of its running. Ultimately, it’s there to help when the unexpected happens. There are many different types of insurance to cover different risks.
This article will look into the following:
- Public liability insurance
- Professional indemnity insurance
- Employers’ liability insurance
In addition to the different types, business liability cover can also be customisable to the specific business, changing with the size and requirements of the industry.
These changeable factors mean that there isn’t a one size fits all when it comes to insurance for businesses. We’ll look into some of the main ones and what they cover.
Public liability insurance
This type of insurance covers your business if a member of the public (a third party) makes a claim against your business for an injury or damage to their property.
If a claim was made against you, public liability insurance will cover you for the following:
- Compensation claims
- Legal expenses
- Cost of repairs
- Medical fees (if the NHS claims against you)
There is usually an agreed excess fee to pay for public liability insurance; for example, you agree with the insurer to pay the first £250 and then the insurance covers the rest of the cost (no matter how big).
It is important to note that this insurance covers the damage to the third party and not yourself or your own employees. This is covered by the other types of insurance, which are discussed later.
Professional indemnity insurance
Professional indemnity insurance is designed to cover compensation costs for any claims made against you by a client, particularly regarding mistakes created at work or false advice being given.
Clients may sue for any mistakes that include:
- breaches of confidentiality
- professional negligence
- loss of documents/data
Some of these mistakes can be seemingly small – such as sending an email to the wrong person – but small mistakes such as this can be dangerous and so professional indemnity insurance protects you from any repercussions.
Compensation payments covered by this insurance can be substantial as they also factor in the financial loss the client has experienced due to the mistake. The insurance covers this, but it doesn’t include the cost of any reputational damage caused.
Employers’ liability insurance
This insurance policy is suitable for a range of businesses – from small businesses with only one employee right up to multinational corporations. It covers your business against financial loss from compensation claims if one of your employees reports that they have suffered an injury or illness as a result of their work.
This means it covers the cost of:
- Medical bills for the sick or injured employee
- Legal costs of settling the claim
- Compensation (if you lose a claim in court)
These costs can be very large as they not only include compensation costs but also legal fees. It can be particularly important for small businesses as a claim can seriously damage their financials – especially when something as easy as slipping on a wet floor can result in a claim.
Loss of income insurance
Businesses can purchase business interruption insurance or loss of income insurance. This type of insurance is designed to cover the loss of income your business may suffer from after a disaster or damage.
This can be a natural disaster as well as criminal or accidental. If your business was unable to trade as a result, this insurance would cover the financials to help your business get going again.
These are just some of the main types of insurance for your business but there are many others that may be necessary for your type of business, such as:
- vehicle insurance
- business interruption insurance (as mentioned above)
- stock insurance
These are important based on what areas you feel may be at more risk. For instance, when looking to protect against theft, a shop may need shop insurance for the cash register or stock insurance to cover the goods. An office may also want additions such as business equipment insurance to cover the loss of equipment and hardware like laptops.
Is business insurance required?
Often there is a pattern that the larger the business, the more insurance policies there are in place as there is more financial risk.
Certain industries will potentially require particular additional types of business insurance. For example, builders and manufacturers will benefit heavily from public liability insurance as it covers injuries to third parties, and these professions have a much higher risk of those types of accidents happening.
Which type of insurance is right for me?
Unfortunately there is no set answer for this. You need to think about the specific risks your business may encounter and what is most important to you. The main types of business insurance discussed are a good base to cover you for most eventualities, but these don’t necessarily cover specifics such as theft, so make sure you get additional cover for anything else. If you are unsure what insurance you have, you should seek the advice of an insurance broker.
If you have any further questions about business insurance, don’t hesitate to get in touch with us.
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