In the UK, there are generally three types of business insurance: Public liability, Product liability and Employers liability.
Only Employers Liability Insurance is required under law. This applies only if there are any employees working under your supervision. Although you may not consider your employees to be employed, it is a good idea to double-check as the definition of an employee’ to insurers can be very broad. There were some cases in which successful claims were made that were extremely tenuous. This could include friends or family members who were working for you for short periods. Consider sub-contractors, freelancers, interns and contractors who do paid work even if it is only for a favor. For more information on your situation, consult your accountant or HMRC.
By law, the minimum legal coverage your business should have should be up to £5,000,000; although many business insurers will provide up to £10,000,000 in cover and others will combine both employers liability cover with both public and product liability into one comprehensive policy.
Covers for product liability and the less important public protect you against other incidents. You should have insurance that covers products and services. This will protect you against any claims arising from illness, injury, or damage to your products. In order to be protected, some authorities and committees may require you to have some kind of insurance. This is often the case for businesses that use a tendering process to select suppliers. This may be a problem for service providers. While those selling a product might have an idea of the risks, they are not able to predict what will happen to their clients. Services, on the other hand, are tailored to specific circumstances and have a tendency change over time. For example, a client might misuse the website design solution you provided and ruin their brand or site, then later blame you for your lack of training.
Even though these cases are rare they do happen. This is why many businesses fail to insure their business. However, when they are sued, the cost is never low if the claim is successful. It’s like playing on an monopoly board with three hotels in Mayfair. You’re unlikely to land there. However, if you do, the cost can make you lose the game or even bankrupt you.
Public Liability is the same. You are protected from the public. Businesses believe they don’t need to pay for customers’ stupidity or inability to coordinate their bodies. But the truth is, if your customer is injured on your premises, you can lose a lot if you aren’t insured. Relying only on their goodwill and acceptance of their own clumsiness is unlikely to get you far.
It is still a good idea to have this coverage. Although many smaller businesses cannot afford to pay for the damages caused by a claim they make, it is possible to get a commercial policy of insurance that covers them. It’s better not to have it than to need it.