The 4 Types of Insurance I Get Asked About Most
Whether you are just starting out or have been trading for a while, it's important to think about the risks you face and how insurance can help protect you. I help small business owners who need help knowing what types of insurance they need and why.
The following 4 types of insurance are a good place to start.
1. Professional Indemnity Insurance
What would happen if your client lost money as a result of the advice you provided them and tried to sue you?
As a small business owner, you are vulnerable to allegations of negligence if your advice falls short of client expectations and they suffer financially as a result. This can be protected by Professional Indemnity insurance, sometimes called management liability.
For example, if you accidentally reveal sensitive information about a client by forwarding an email to the wrong person.
You produce a report for a client suggesting ways to grow their sales, but they end up losing business and they take legal action against you to recover the lost income.
An insurance policy could cover your legal costs and expenses as well as damages or costs awarded. And I am guessing you won’t be able to afford to meet these costs yourself without insurance?
In which case you might be thinking – Do I need this type of cover?
- give advice
- Provide designs
- You want protection against allegations of mistakes
- Your industry regulator requires it
Then this cover will be a must-have for you.
This type of insurance would cover the legal costs and compensation, within the terms and conditions of the policy, if a claim is made against you this could happen if a client claims that one of your downloads contains an image you don’t have permission to use and they felt it has caused them to suffer a financial loss, or if a competitor feels you have said something defamatory about their product in a tweet or blog post which has damaged their reputation.
2. Public Liability Insurance
When people start talking about getting sued it can be very scary, especially if you are just starting in business. Nobody wants to get sued but genuine accidents do happen.
While it’s not a legal requirement, it is a good idea for all small businesses to have public liability insurance, this protects you if you cause damage or injury to someone else.
These types of claims commonly arise from slips, trips, and falls for example, if you are delivering a workshop and someone trips over your laptop cable and gets a nasty cut to the knee, maybe damages their watch on the way down. It may not seem serious, but it could cost you £3,000 plus £5,000 legal fees without insurance, can you cover this cost?
Your public liability insurance will cover the legal costs and expenses, compensation, consequential losses (like loss of earnings) and provide you with the legal advice you need to resolve the matter if you are legally liable.
If someone does try to sue you, like in the example above legal liability can only be decided by courts according to Tort law which generally refers to private and civil offences for which law may provide monetary compensation to the aggrieved party as a remedy.
This type of insurance is not compulsory, but you should have it if;
· clients may ask you to have it.
· If you are delivering workshops or training at other locations (or exhibiting) the venue will likely ask for a minimum amount of cover, it is not unusual to have between £1m and £5m cover.
If you have employees, temps, trainees, or volunteers working for you then you will be legally required to have employer’s liability insurance.
3. Cyber Insurance
OK so anyone who uses a computer to run their business, has a website or an email list needs to be buying cyber insurance.
The number of threats to your business is on the rise, and with cyber-crime making up more than 50% of crime in the UK, you will likely become a victim.
This could be a result of a theft i.e.; someone pinches your laptop but more likely it will be a phishing scam or hacker that gets hold of your data. The chances are you have already had a dodgy email from Apple, Microsoft or Amazon, lots are doing the rounds. Sadly, the biggest risk to your business is human error, you click on a link that lets them in and before you know it, they have your data.
You may need cyber insurance if you hold sensitive customer data, such as names, addresses or banking information, or if you are reliant on computer systems to conduct your business, have a website, or are subject to a payment card industry (PCI) merchant services agreement. Damage or unauthorised access to any of these could lead to reputational damage, legal and/or regulatory costs.
If you have an online shop for your services and your site crashes or is down for a significant period causing an interruption to your business and preventing you from making sales this is a denial of service would be covered by a cyber insurance policy.
There are various types of cyber-attack that you may find you are a victim of including; rogue employees, negligence, outsider threat (phishing, hacking, malware etc.) or 3rd party and vendor threat. You should think about what you would do if you were a victim of a cyber-attack and put in place a process to respond.
Cyber insurance can offer protection for cyber extortion, ransomware, breach costs, cyber business interruption, hacker damage, crisis containment, emergency support, legal advice, public relations advice, and restoration of services. The cover provided by insurers differs from product to product and the amount covered or limit of indemnity can also differ from policy to policy, so it is wise to talk to an insurer or insurance broker who can steer you through the process.
You can read my blog on Cyber Insurance here - https://www.catherinefrance.com/post/what-is-cyber-insurance
4. Home Insurance
A lot of small business owners, like me, work from home. You may not need additional insurance cover, but it's best to check with your home insurer so they know that you work from home - some can add business equipment to your existing policy.
Don't be worried about telling your insurer, if you work from home then your house is probably occupied during the day rather than being empty and most insurers would see this as a benefit as it reduces the chance of a break-in.
Have you had to pivot your business during the lockdown and now find yourself working from home?
You'll need to inform your insurer if your work situation changes, even if this is in the middle of a policy, if you don’t it could invalidate your insurance.
If your property, god forbid, burnt down and a loss adjuster found that you run a business from home then they could refuse to pay the claim on the basis that you withheld a material fact, however unfair this may sound.
If your home insurer won't extend cover to include your business you should look for a "working from home" policy.
How to Get More Information for Free?
If you need more information about the types of insurance, you might need to protect your business you can download my guide - 10 Types of Insurance Every Small Business Needs
Need a bit more help?
If you need a bit more help finding out about the insurance you need to protect your business you can book a 121 with me here - https://www.catherinefrance.com/booka121
Content Disclaimer: The information contained above is provided for information purposes only. The contents of this article are not intended to amount to advice, and you should not rely on any of the contents of this article. Professional advice should be obtained before taking or refraining from taking any action as a result of the contents of this article. Catherine France disclaims all liability and responsibility arising from any reliance placed on any of the contents of this article.