If you run a small business, personal insurance won’t cover business-related claims. Here’s what you need to consider.
Types of Business Insurance
| Type | What It Covers | Who Needs It |
|---|---|---|
| Public liability | Injury to customers or damage to their property | Most businesses |
| Employers’ liability | Injury to employees | Anyone with employees |
| Professional indemnity | Mistakes in your professional advice | Consultants, accountants, designers |
| Product liability | Injury from products you sell | Retailers, manufacturers |
| Business contents | Equipment, stock, tools | Anyone with business assets |
| Business interruption | Loss of income if you can’t trade | Most businesses |
Employers’ Liability Insurance
Legal requirement if you have any employees (including part-time).
| Detail | Requirement |
|---|---|
| Minimum cover | £5 million |
| Penalty for not having it | £2,500 per day |
| Certificate | Must display at your premises |
Public Liability Insurance
Covers you if a customer is injured or their property is damaged.
| Business Type | Typical Cost |
|---|---|
| Freelancer (home-based) | £50-£100/year |
| Tradesperson | £100-£300/year |
| Retail shop | £200-£500/year |
| Restaurant/cafe | £300-£800/year |
Professional Indemnity Insurance
Covers claims of professional negligence.
| Profession | Recommended Cover |
|---|---|
| Accountant | £500K-£1M |
| Consultant | £250K-£500K |
| Web developer | £250K-£500K |
| Architect | £1M+ |
| Financial adviser | £1M+ |
Business Contents Insurance
| Item | Value | Insurance Needed |
|---|---|---|
| Laptop | £1,500 | Business contents |
| Tools | £2,000 | Business contents |
| Stock | £5,000 | Business contents |
| Furniture | £3,000 | Business contents |
| Total | £11,500 | Contents insurance |
Home insurance typically excludes business equipment. Don’t assume your laptop is covered if you work from home.
Insurance by Business Type
| Business | Likely Needs |
|---|---|
| Freelancer (home office) | Professional indemnity + business contents |
| Builder/plumber/electrician | Public liability + tools cover + van insurance |
| Shop/retailer | Public liability + contents + product liability |
| Restaurant/cafe | Public liability + contents + employers’ liability |
| Consultant | Professional indemnity + public liability |
| E-commerce seller | Product liability + public liability + goods in transit |
How to Save
| Tip | Saving |
|---|---|
| Bundle multiple covers | 10-20% |
| Increase excess to £250 | 10-15% |
| Pay annually | 10-20% |
| Don’t over-insure | Only buy what you need |
| Compare at renewal | 20-40% |
| Join a trade association | Group discounts available |
Bottom Line
If you have employees, employers’ liability is a legal requirement. If you interact with customers or clients, public liability covers the most common risks. If you give professional advice, professional indemnity is essential. Start with the legally required cover, add based on your specific risks, and shop around at renewal. Business insurance is tax-deductible.
The Covers That Matter Most
Before buying anything, focus on the covers that map directly to your day-to-day risks. For most small businesses that means public liability, business contents, and — if you advise others — professional indemnity. Employers’ liability is non-negotiable if you hire anyone. Start with the legally required cover, add what your specific activities demand, and resist the temptation to insure against risks you simply do not face.
What to Avoid
A few common mistakes cost small-business owners money or leave them exposed:
Buying only the cheapest policy. A budget policy with a low public liability limit may look tempting, but one significant claim can dwarf the small annual saving. Check the sums insured, not just the price.
Assuming personal insurance covers business activity. As noted above, home and personal policies usually exclude business use. If you work from home, your laptop, tools, and stock are typically not covered without a business contents policy.
Forgetting about growth. A cover level that made sense for a one-person consultancy can be nowhere near enough once you take on staff, expand premises, or start holding stock. Review your limits at least once a year.
Under-declaring risk. Insurers expect accurate information. Telling a professional indemnity insurer you only do basic work when you routinely advise on complex matters can see a claim rejected for non-disclosure.
Never revisiting the market. Business premiums drift upward, and new providers enter constantly. Comparing at renewal — a fear that accounts for the 20-40% saving quoted earlier — is one of the easiest wins available.
Common Questions
What happens if I employ someone without employers’ liability? You are breaking the law and could face a fine of up to £2,500 per day, and any compensation you owe an injured employee would come from your own pocket rather than a policy.
Can I insure the business and my home together? You can often bundle business contents cover with public liability, and some providers offer discounts for multi-policy arrangements. It is usually cheaper than buying separate policies, but always compare the combined price against standalone quotes.
Do I need product liability if I only sell online? Almost certainly yes if you sell physical goods. Product liability covers injury or damage caused by the products you sell, and it matters to e-commerce sellers as much as to shop retailers. Add goods-in-transit cover if you arrange delivery yourself.
When should I review my cover? At least annually, and immediately after any significant change — taking on an employee, moving premises, adding a new service, or substantially changing your turnover.