All businesses will be confronted by a number of different challenges and levels of risk. It is important to ensure that companies put in place the relevant types of business insurance as protection against these risks. Business insurance is there to offer protection against losses that occur when running the organisation, such as damage to property or equipment, or if a consumer or staff member takes out a claim against the company.
There are different types of policy cover that businesses are required by law, to take out, but also there a number of policies tailored to the specific industry or sector, that should be considered. Even just one uninsured incident in the workplace has the potential for serious financial and reputational consequences, so it pays to be prepared.
What is compulsory insurance?
This is any type of insurance that a business or an individual is required by law to take out, and probably the one this is most widely known, would be the vehicle and/or motor cycle insurance that drivers are required to hold. For employers, compulsory insurance would be that which covers their staff members, such as employee liability and, in some countries and states, professional indemnity insurance for sectors that include medical professionals. To check the requirements for individual businesses on compulsory insurance for their sector and profession, it is important to speak to an expert in business insurance.
Let’s continue by looking at the basics which covers general liability, property, casualty and compensation.
General liability insurance
If you have clients, visitors, volunteers or contractors working or visiting your premises and they are injured or there is accidental damage, to their equipment, vehicles or other property, by you or your staff, there needs to be Public Liability Insurance in place. Employee Liability insurance is a requirement even if the business employs just one staff member and must cover full-time and part-time staff, as well as any temporary seasonal workers.
Casualty and compensation
Even if the company is not the manufacturer, there are a number of rules and regulations around products bought and sold. If the business is involved in designing products or repair and supply, it needs to protect itself against claims for compensation, if someone suffers illness, damage or injury due to their product. A number of insurance firms do offer Product Liability Insurance and also Business Interruption policies. If the firm has to stop production due to a health and safety investigation, repairs to equipment or structural damage to the business property such as fire and flood, it is also worthwhile investing in Business Interruption insurance. Staff will still need to be paid and customers may need to be compensated, therefore it can be very expensive. Cash flow, which is at the heart of every business, can be impacted and having this sort of insurance will enable the business owner to meet those essential monthly bills. If the company has to rent out alternative property, another added and unforeseen expense, this form of insurance becomes a lifeline and should not be ignored.
A company needs to protect its property from the buildings it operates within, to the machinery, stock, tools and equipment as well as the less tangible items, such as intellectual property rights and loss of data or damage caused by IT systems. Insurance against unforeseen circumstances, which should be built in the company risk management plan, such as burglary and theft is definitely a requirement.
Commercial property insurance is another such policy that in the event of damage or loss to the property housing the company (and this can include offices, warehouse, factory or market stall), a financial payment will help compensate for the losses. If there is a lot of the firm’s money tied up in stock and it is the sort of product that is susceptible to damage or spoilage (food, fragile items, electronic equipment just to mention a few) then the business must consider an insurance policy that mitigates against spoilage of stock.
Also, if operating a fleet of vehicles or just cars for staff representatives, then it will be cost effective to consider motor fleet insurance. This can also include any mobile plant and equipment as well as the owner of the company’s personal vehicle.
Casualty and compensation
A number of policies identified above do cover casualty and compensation but there are also some specific business insurance policies that companies need to know about. One of these is Key Person Insurance and it compensates the organisation if one of its key people suffer illness or injury or a fatality. It can cushion a company through payments which can be used to train up or resource another individual. It means the business can carry on its day-to-day activities and keep the business viable.
For businesses who provide a professional service and advice, such as solicitors, chartered engineers and surveyors or financial planners, it is imperative that the firm has Professional Indemnity insurance in place. The potential to be sued is high in this sector and legal fees are not cheap, plus damages awarded to claimants can be very expensive. Protecting against the potential for lawsuits is good business practice, no matter how robust the quality assurance process is within the firm.
Investing in these types of business insurance policies will pay for itself in the long run, not only peace of mind for the owners and investors, but in maintaining the value and integrity of the business the policies cover.