RSA New Business Guide

Authored by RSA

As a new business starts, and the excitement of what is to come builds, it can be easy to overlook the things you need or try to cut some of the many initial set-up costs - but business insurance shouldn’t be one of the corners an owner cuts.  Getting the right cover for any new enterprise could not only protect that business from certain risks, but it could also save money and a lot of stress in the long run. In this article, we take a closer look at the key insurance that any new business needs to think about.

Recent studies show that there has been a boom of new businesses opening in the UK. According to the Business Statistics bulletin, there were 810,316 new businesses launched in the financial year ending in 2021 - the highest number of launches on record and an increase of 21.8% when compared with 2019.

With new attitudes to working flexibly and many people having used the UK lockdowns to reflect on their career and life decisions, it’s hardly surprising that we are witnessing such a surge in enterprising business taking off. In fact, recent reports show that as many as 46% of people in the UK started a ‘side hustle’ during the pandemic.

However, many new business owners are unaware of what's available and appropriate for their business, and policy wording can be confusing. As business insurance specialists, we’ve created a guide on compulsory cover and those lesser-known policies a modern business owner should seriously consider.

What insurance should you take when starting out?

In short, the combination of insurances and level of cover you need are entirely dependent on what your business does and what unique risks it may face in working with clients, customers, and employees.

Some types of cover may be essential, and there are a few that every business should consider when starting out:

Employers Liability Insurance (EL)

If you have employees, then you are legally required to have EL to cover your business, which can protect you if a staff member claims against you. This can be if they have suffered an illness or injury at work and covers you for legal and compensation costs to defend the case.

If you do not have EL, the Health and Safety Executive (HSE) can fine you £2,500 for every day you haven’t had protection. The legislation makes a few exceptions, for example if you only employ immediate family members.

Public Liability Insurance (PL)

The most popular insurance for business owners, PL insurance is designed to cover compensation claims made by a member of the public who blames your business for any injury or property damage.

Although not a legal requirement, not only could PL protect you from hefty legal costs, your clients and suppliers may also request you have PL as a contractual condition.

Product Liability Insurance

Does your business make or sell products? If so, product liability insurance can protect you from any compensation claims if a product that you sell causes injury or damage to someone.

Professional Indemnity Insurance

If you offer a professional service, consultancy or provide advice to clients, professional indemnity insurance is very important. It protects you against compensation claims made by a client when they think you have made a mistake. This can be for things like breaching confidentiality, infringing copyright, or giving advice that causes them to lose any money. Some professional bodies and regulators insist on a professional indemnity policy, especially if you offer advice in critical areas like law, finance, and healthcare.

Buildings and contents insurance

If you’ve got a business premises such as a shop or an office, buildings and contents insurance are a must. If you are renting, then your landlord should cover the building, but if you own your space then you need to insure the building too.

If, like around 70% of new businesses, you are starting off at home, then you should check your home insurance policy to see if business activities are covered.

Business Motor Insurance

If your business uses vehicles for deliveries or transport, appropriate business motor insurance is a legal requirement, at least to a third-party level of cover. If you use vans, there are specific commercial vehicle polices you may need to consider.

Other insurance you may want to consider

There are many policies that aren’t mandatory or necessarily appropriate for all businesses but can still be helpful if your business faces certain risks, and especially as your business (and thus its liabilities) grow.  A few of the most important policies to consider include:

Business Interruption Insurance (BI)

You may have read a lot about BI throughout the pandemic, but it has become an essential for small business owners where closing their premises would be a trade killer.

Often part of business insurance package, BI insurance can cover loss of revenue and costs if your business is unable to operate for some unforeseen reason. Not all policies include BI, so it’s worth checking any wording, or add it as extra cover.

Directors and Officers Insurance (D&O)

D&O, also known as management Insurance, is cover that protects the individuals who have management responsibility in the business rather than the business as a whole.

Key-man Insurance

It’s not a silly concept to insure your most valuable asset - your people. Key-man insurance covers you for financial losses incurred by the death or incapacity of an important member of the business.

Plant and Machinery Insurance

Important if you are operating in the construction or manufacturing industry, this policy covers loss or damage to construction equipment, such as cranes, excavators, bulldozers, and heavy processing machinery due to specific perils.

You may also want to look at specific policies for equipment/tools. This could provide invaluable cover if your equipment is stolen or damaged because of an insured event, and some contents policies won’t cover them.

Credit Risk Insurance

In today’s uncertain economic climate, protecting yourself from non-payment could be vital to your business survival. Credit Risk Insurance insures against non-payment by individual companies and financial bodies, including financing like corporate loans and finance for export, trade contracts and specific projects.

Cyber Insurance

With digital businesses flourishing, protecting your business, and your customers, from savvy hackers is certainly worth considering. In 2021, four in ten businesses (39%) reported having cyber security breaches or attacks.

Cyber insurance covers damage or loss of information from IT systems, servers and networks. When claims can spiral into millions, it’s a must for any company with a heavy technical estate. It’s particularly advisable if your company stores or manages electronic data such as personal, financial or credit card information.

It’s fair to say that launching a successful business is fraught with challenges, but don’t let insurance be one of them.  Over the years, RSA has established great relationships with brokers of all sizes and specialisms, which when coupled with our profound level of industry insight, have allowed us to develop market-leading insurance covers and packages tailored to every type of commercial customer.

Want to know more? Give us a call, our Commercial Insurance team will be happy to help you identify what cover is best for any new start-up.