Whether we like it or not, no SME can function without insurance. It’s essential both for meeting legal obligations and protecting your business against common risks and rising threats. So what do you need – and where can you find out more?
Research reveals a great many SMEs are either underinsured – or not insured at all for major risks. Not consciously or maliciously, simply through not being aware. 28% of SMEs project that an uninsured loss of £50,000 would put them out of business*.
Legally, what types of insurance does your business need?
While there are many types that SMEs are strongly advised to take out, there are only two that are compulsory.
If you have at least one employee, you must have employers’ liability insurance to cover you when they get ill or injured while working for you.
If you have vehicles, motor insurance is also mandatory, to cover your business against the cost of damage to other vehicles, people and property.
Find out which insurers were rated highly by SMEs in recent independent research.
High risk insurance areas worth considering seriously
If customers visit your premises – or your employees visit customers offsite, it’s important to have public liability insurance. Without it you’re not covered for anything from accidents and injuries on your premises – to employees accidentally (or negligently) causing damage. And with the average settlement at around £13,500**, the cost of premiums is a fraction of just one claim.
Commercial property insurance is also a business essential, protecting your premises, stock, fittings and fixtures against the impact of fire, flood and other business-damaging events.
Professional negligence insurance (PI) protects your business against (potentially multi-million pound claims) when work for a client goes wrong. While not a legal requirement, PI is increasingly insisted on as a contractual must-have for consultants, advisers and service providers who want to do business with larger companies.
And while one in four businesses has suffered at least one cyber breach in the past 12 months, only 9% of SMEs have separate cyber insurance. Increasingly common in businesses of all sizes, cybercrime both prevents your business from functioning and creates a serious loss of trust in your customers. A low level of cyber insurance is included in some general business policies, so it’s worth checking if you are covered and whether a separate cyber policy would better suit your needs.
You’ll find independent SME ratings of 38 insurance providers here.
Buying business insurance – who do SMEs rate?
Business Banking Insight provides unique support for SMEs on its website. Every three months it offers insight into the providers and their financial products – from business insurance to current accounts. It doesn’t sell products of its own – but helps SMEs make more informed financial product decisions. Invaluable when either taking out a new product, switching or reviewing your insurance plans. Visit their business insurance page and see how other SMEs rate their current providers.
Should you buy direct or through a broker?
There’s no simple answer here. Buying direct might be faster and easier, especially if buying online. You’ll also be able to compare similar products’ prices using an online search engine.
Insurance brokers will gather your business’s needs then contact their panel, often made up of specialists who only trade through brokers. Their specialism may be in unique products, your business sector or price. As middlemen, insurance brokers will charge a fee, but this could easily be outweighed by finding the best value from a number of providers.
Either way, it’s essential you do your homework to ensure you don’t expose your business to unnecessary risks.
* RSA, Future Impacts, November 2016
** Based on public liability settlements made by AXA in 2013