Starting a business is tricky – there are a lot of things you have to keep track of, and only some of those things are fun and exciting. Insurance is (in my opinion) unfortunately, not one of those things. Not to worry though – I’m Jeremy Powers and this post explains the ins and outs of business insurance.
The first thing you need to know is that your business needs insurance in order to cover the damages done within or outside your office to someone or something. For example, if you’re an interpreter and you misinterpreted a sentence at a business conference so badly that it offended the opposite side and you lost your client several thousand pounds. They are, of course, demanding compensation, and this is where insurance comes in.
Professional Indemnity Insurance
The above example is an example of a situation covered by what is known as professional indemnity insurance. Before you wince at the fancy-sounding term, let me tell you – it’s actually quite simple. The basis for professional indemnity insurance is that you don’t have to repay the compensation your client is claiming for what you’ve cost him. Professional indemnity insurance is definitely something you should at the very least consider obtaining. If you’re reading this post, I presume that you offer professional services to clients (like interpreting services I mention above) and that your clients use these services in their own business, understanding the financial risks carried with them. If at least one of the above applies to your company, I strongly advise you to have some form of professional indemnity insurance in place.
Public Liability Insurance
Another option you should definitely keep in mind is public liability insurance. It probably applies a bit less to you if you’re working from home, running an online-only business. However, if you’re in an office and you have clients coming in, I urge you to consider public liability insurance. For a better illustration of what it actually is, I’ll give you an example: you have a client walking into your conference room where the floor has just been mopped and the cleaner forgot to put up a “Caution: Wet Floor Sign”. Your client slips on the wet floor, falls down and breaks a leg. After she recovers, she demands compensation from you. Do you really want to be the one paying it? Of course you don’t. This is where public liability insurance comes in.
If you’re a sole trader, you probably can skip this paragraph, although I don’t recommend it – you never know when you might need to hire some people. Unlike the above options, employers’ liability insurance cover is actually a legal requirement for any businesses that employ members of staff. Employers’ liability insurance works similarly to public liability insurance, except it applies to your staff members instead of your clients. Falling down the office stairs or getting an asthma attack inside a broken elevator is more common than you’d think. Employers’ liability can help you cover claims of compensation for accidents like these filed by your employees (not including family members), provided that they’re employed legally.
Other Types of Insurance
There are also other options you could consider, depending on the size of your business and the type of products you create or services you provide. For example, there’s equipment insurance that would help you out if someone damages your working equipment (a computer, a camera, or whatever else you might be employing on a daily basis). There’s also stock insurance which is applicable to you if you’re publicly trading shares. Stock insurance can protect you against claims from investors for stock market losses.
While I have outlined the three insurance options that I consider to be the most significant for any company and given you some examples of other types of insurance, it’s really up to you to decide what kind of insurance you need in the short and the long term. I’ve compiled a non-exhaustive list of some things you should take into account when making a decision:
- Type of your product/service
- Industry you operate in
- Organisation’s structure – private or public company? Sole trader? Partnership?
- Premises – are you working from home or an office?
- Number of people you employ (if any)
- Your target audience and your current clientele
- Number of equipment units you use on a daily basis
There are many other things you should consider, of course, but they’re outside the scope of this post.
I can understand why insurance would look intimidating to even an experienced businessman (or a businesswoman). Many people who have been players in various industries for a long time have reported to be having trouble understanding their companies’ insurance policies. One of the reasons for that is that insurance policies tend to be outdated when it comes to the majority of industries, and many business owners take the ones they have for granted and never bother to include any new options. In my opinion, as I stated above, this is a mistake. I hope, therefore, that this post has somewhat clarified insurance for you and that you’d take my advice into account when selecting insurance options for your business.