• Catherine France

The Insurance You Really Need for Your Small Business

Updated: Jan 12

(Especially if you’re taking it online for the first time)


With more and more people taking their businesses online for the first time, I want to share some information with you about the types of business insurance you might need to protect you.


Here’s what’s covered.


1. What business insurance you need if you’re working from home


2. How Cyber insurance can help protect your data if you’re hacked


3. How Professional indemnity protects you for the advice you give to your clients


If you want more information, then head over to my website www.catherinefrance.com


You can also find me on Twitter, Facebook and LinkedIn.


1. What business insurance you need if you’re working from home


Have you had to pivot your business during the lockdown and now find yourself working from home?


Or maybe you are one of the 4.8 million people who now class themselves as self-employed many of whom run a business from home.


It is a great idea to use your home as your office – it's a low cost, convenient, reduces your commute to zero and you don't need to worry about feeding the cats but what would happen if you suffered a loss that wasn't insured, could your cash flow cope?


Have you considered the potential risks and taken steps to protect yourself and your clients?


With the best will in the world accidents can happen, whether it's a slip, trip or you spill a drink on someone. Even the most innocuous of claim can end up costing you, thousands of pounds, which if you are not insured, could have a detrimental effect on your cash flow.

Making sure you have the right insurance in place could help protect you and your clients, albeit I know that some of these scenarios may not be possible in the current lockdown.


Here are the types of insurance you should think about.


Professional Indemnity - Professional Indemnity Insurance is important if your business gives advice to other people or businesses. This type of cover is designed to protect you if you provide clients with incorrect advice which results in them suffering a financial loss which could result in them taking legal action against you. This type of insurance would cover the legal costs and compensation, within the terms and conditions of the policy.


A claim against you could arise if a client claims that one of your coaching packages steered them in the wrong direction or if they felt it has caused them to suffer a financial loss, perhaps their business does not grow as expected, or a suggested strategy does not glean the results they were expecting and they feel you are at fault. This does not mean you are at fault, but the insurance will help you defend such allegations.


Home Insurance - If an accident involving someone else occurs at your house in the course of your business, then you may not be covered under your homeowners' insurance policy. Your home may be private but your liability, in the event of a work-related mishap, can be uncomfortably public.


Standard home insurance only financially protects you for loss, damage or theft which affects items used for 'household administration duties' in the home, not business use.

If you work from home and something goes wrong in circumstances associated with your work, which you then claim for, the insurer might deny the claim if you hadn't changed your policy to reflect your home working.


It may be that you need what's called an 'all-risks' policy, which includes items used for your business purposes. An all-risks policy can cover business items when they're taken away from home, such as a work laptop.


If in doubt, ask - It's best to check if you're covered for work you do from home, as if you're not, you risk losing your home's contents and possibly building too with no compensation.


Business Interruption Insurance - Business Interruption is there to help you get back up and running if there is an event, such as fire or flood, which stops or interrupts your trading, and this type of insurance can cover the consequential loss of revenue. It can also provide alternative premises, so you can keep trading, cover if your main supplier suffers a loss and your business suffers or cover if a laptop/tablet is stolen preventing you from trading but check with each insurer for full terms and conditions.


Motor Insurance - You will need the right Motor Insurance for business use if you are visiting clients in your car or transporting your stock or goods between your business, suppliers to events.


Cyber Insurance – If you use a computer to run your business then you probably need cyber insurance. The increase in the number of incidents where people use a computer to commit a criminal offence is on the rise and a cyber insurance policy can help, whether you suffer a data breach or a hacker holds you to ransom, provide cover against damage to your computer systems, removing viruses and loss of income in addition to which insurers can also include access to professional cybersecurity consultants and PR experts to help minimise the reputational damage a loss of data could cause your business.


If you enjoyed this post, you might find these useful;


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2. How Cyber insurance can help protect your data if you are hacked


Do you use a computer to run your business? What would happen if your laptop was hacked or stolen? Could your cash flow cope? Could you afford an IT consultant to help fix things in a hurry?


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 as a result of a theft, for example, someone pinches your laptop but more likely it will be a phishing scam or hacker that gets hold of your data.


Government research has found that just 11% of businesses have taken out specific cybersecurity insurance policies.


As businesses become ever more reliant on technology, the risk of suffering a loss related to problems with computer systems or holding customer data continues to grow.


It could be that your business holds personal information on clients or customers, including names, addresses and banks details. Maybe your systems and data are held on physical servers or in the cloud. Or perhaps you are reliant on a website for the running of your business. Damage or unauthorised access to any of these could lead to reputational damage and legal or regulatory costs.


Cyber insurance can help protect you, by covering the cost of repairing your system and restoring your system, data and website as well as covering the legal costs if you are sued. Insurance can also cover the reputational damage and the cost of temporary equipment to cover lost revenue.


You may need cyber and data risks insurance if you:

  • hold sensitive customer data, such as names, addresses or banking information

  • are reliant on computer systems to conduct your business

  • have a website

  • are subject to a payment card industry (PCI) merchant services agreement.

Sadly, this is the biggest risk to your business, and the main cause is human error, you click on a link that lets them into your system and before you know it, they have your data.


A claim of this type has several elements, the privacy aspect, the security aspect and the incident response element.


If you suffer a cyber breach, having cyber insurance can make the recovery process as straightforward and rapid as possible (however it is still likely to take several days or weeks depending on the severity of the incident). Many insurers include technical assistance with managing a breach as part of the insurance policy – if so, get in touch with them as soon as possible after the breach is discovered.


Cyber insurance policies are split into two sections – first-party and third-party cover. First-party insurance covers your business's assets. This may include:

  • Loss or damage to digital assets such as data or software programmes

  • Business interruption from network downtime

  • Cyber extortion where third parties threaten to damage or release data if money is not paid to them

  • Customer notification expenses when there is a legal or regulatory requirement to notify them of a security or privacy breach

  • Reputational damage arising from a breach of data that results in loss of intellectual property or customers

  • Theft of money or digital assets through theft of equipment or electronic theft

Third-party insurance covers the assets of others, typically your customers. This may include:

  • Security and privacy breaches, and the investigation, defence costs and civil damages associated with them

  • Multi-media liability, to cover investigation, defence costs and civil damages arising from defamation, breach of privacy or negligence in a publication in electronic or print media

  • Loss of third-party data, including payment of compensation to customers for denial of access, and failure of software or systems. [1]

How much cyber insurance do I need?

Insurers and brokers will ask you a series of questions to help work out the level of cover you need, the sorts of things they will want to know are:

  • your business’ turnover

  • number of devices you use to run your business,

  • number of employees

  • the number of records you hold in the following categories: personal data, sensitive date and financial/payment data

According to global broker Aon the average cost of responding to a data breach is £110 per record.[3]


If you are the victim of a data breach and all of your 10,000 records are compromised. You will probably be required to write a letter to each of them to report this (a letter is needed because the worst thing a business can do after a data loss is to email their clients to report it). At 65p for a first-class stamp, that’s a £6.5k hit to your cash flow gone before the business even starts to look at the other legal costs.


How much would a cyber-attack cost the average small business?

Breaches of cyber security cost the average small business £25,700 in 2019, including costs such as ransom payments and hardware replacements. On top of this, there were indirect financial factors, such as managing damage to reputation and the cost of losing customers.

How much does cyber insurance cost?

Cyber liability insurance can cost vary, depending on what you do, the type of policy you choose and what level of cover you require and if you want additional cover for things like financial crime.


If you’re a sole trader with a basic turnover, cyber liability insurance can cost as little as around £8 a month. A lot less than the £25,700 Hiscox quote it costs the average small business to get back to normal after a cyber-attack.


Insurance Octopus quote a figure of £182 per year for their cyber insurance policy, as a rough guide. [4]


Cyber insurance represents excellent value for money. Cyber incidents and data breaches can cost your business a lot more than simply a hit to your finances. Huge penalties under data protection laws, regulatory fines, reputational damage, and loss of business are just a few of the potential consequences of a cyber-attack and are all things that cyber insurance can protect you against. [4]


Sources:

[1] https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/business-insurance/cyber-risk-insurance/

[2] Source: https://www.bytestart.co.uk/what-is-cyber-insurance.html

[3] Aon Cyber Calculator

[4] Insurance Octopus


3. How Professional indemnity protects you for the advice you give to your clients


What would happen if your client lost money as a result of the advice you provided them, and your client then tried to sue you?


As a self-employed coach or consultant, you're 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, you're working on a sales campaign for a client and when sending the information to a mailing house you accidentally send your clients customer information to the wrong person or say you're a web designer and you inadvertently use an unlicensed image on a client's website. Your client would be within their rights to sue you for damages.


A professional indemnity policy will typically cover you in the following ways.


• Take care of any legal representation you need.

• Cover the cost of any damages should you lose your case.

• Cover the costs of putting right any mistakes you've made.

• Protect you if you lose a client's documents while they're in your possession.


Do you need this type of cover? The answer is yes if you;

  • Give advice

  • Provide designs

  • Want protection against allegations of mistakes

  • Have an industry regulator that requires it

If you tick any of those boxes, this cover will be a must-have for you.


The examples I gave earlier were settled at £22,500 and £9,000 and with cover from as little as £100 per year for me it’s a bit of a no-brainer.

Key Takeaways


1. If you are working from home you need to make sure your home insurer is aware you are running a business from home.


2. If you need insurance for business equipment, public liability and business interruption you need a business insurance policy, a home insurance policy will not cover these things.


3. If you use a computer to run your business or have a website, online shop or have a mailing list then you will need cyber insurance to protect your data (and that of your clients) in case you are hacked, or lose your laptop.


4. If you give advice for a fee and your customers could suffer a financial loss if your advice is incorrect or they feel it has fallen short of the mark and try and sue you you will need a professional indemnity policy to protect you.


5. It is worth thinking about how and where you buy your insurance, if you buy it online then you are not getting any advice however, if you use a broker you will be getting their advice and insurance tailored to meet your needs. It is their job to match you with the right cover. You can find out more about advised and non-advised sales here.

What to do Next?


Is finding the right insurance for your small business frustrating and confusing. Perhaps you have tried to get insurance before but are confused by the different types of insurance or you're worried that you're underinsured.

Maybe you are so confused that you don’t want to admit that you don’t have any insurance at all.

Book a 30-minute 1-2-1 call for £39 and we can get you on the right track.

Important Note: This blog post is written to provide you with information on the types of risks your business could face and the sort of insurance which could help you protect you and your business; however, this is not personalised advice, and every business is different. If you need to arrange cover please contact an insurer or insurance broker.

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