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If you own a start-up or small business you probably don’t yet have much money left at the end of each month. You’ll have more money going out than coming in for probably at least the first year and you should anticipate not being supported by your business for at least the first three years. It’s therefore very tempting to skimp on insurance as it’s an expense you hope you can do without.
Employers’ liability insurance is a bit different because if you have any employees you must have that insurance in place by law, and if you don’t you can receive a large fine and a criminal record that might well scupper any chances you might have of continuing your business in any event.
Other types of business insurance might seem more optional than vital, though, especially if money is a bit tight. But the way to think about insurance is that it is far, far cheaper and far less devastating to your livelihood than any claim for compensation would be. It doesn’t take much to leave you open to a claim for compensation (by a member of the public, say, or a client) and if that were to ever happen you would have to pay for your legal costs, plus any compensation ordered and any legal costs incurred by the person who has sued you.
Taking out public liability insurance is vital if you want to continue trading if ever a customer slips on your floor, or if you accidentally introduce a virus into a client’s computer and network. If you don’t have insurance in place, you would have to pay the compensation and legal costs from your business’s assets (if there were any) and/or your own assets (including your home). Even if you are sued and ultimately win the case, you will still have had to pay all your legal fees during the case and if the court ordered that you have those repaid, the person who sued you might not be able to afford to do so.
Business insurance is calculated by insurers in the same way as any other insurance: they look at the likelihood that you will make a claim. There are plenty of factors that can influence that likelihood, including where your business is located, how long you’ve been in business, how many claims you’ve made before and what type of work you do. By adding extra security and fire defences such as smoke alarms and sprinklers you can reduce your annual premium, and you can also reduce the chances of having to make a claim by ensuring that all staff are trained in health and safety regulations and use all required safety precautions for their work.
Specialist business insurance is available through various insurers but you should check policy details before committing to ensure that the policy will meet all of your requirements and that there are no exclusions that would affect your business. Online policies are far easier to compare than if you were to telephone various insurance providers but there is a greater expectation that you will have read the terms and conditions (the small print) before buying a policy.