10 types of business insurance for SMEs

A variety of business insurance products are available for small and medium-sized enterprises (SMEs). Depending on the specific circumstances of a business, certain types of insurance may be mandatory. Additionally, many policies are tailored to particular industries. Let’s explore 10 of the most common types of business insurance.

Employers’ Liability Insurance

Any business with employees is legally required to take out Employers’ Liability Insurance. This policy must be obtained from an authorised insurer and provide a minimum of £5 million of cover.

The purpose of Employers’ Liability Insurance is to enable an employer to pay compensation to an employee who suffers injury or illness in the workplace or as a result of work-related activity.

Failure to obtain Employers’ Liability Insurance can result in a fine of £2,500 for each day a business has employees on their books without cover. An additional £1,000 fine can be levied if an employer does not display their Employers’ Liability Insurance certificate on their business premises.

Motor Insurance

Anyone who uses a motor vehicle for their business must ensure they have at least third-party motor vehicle insurance cover. This is a legal obligation for both commercial and personal vehicles.

If a business provides company cars to its employees, it is the business’ responsibility to obtain the minimum third-party insurance required for its fleet.

Where a business relies on its own vehicles, such as a transportation company, it is wise to obtain comprehensive insurance. The provision of temporary replacement vehicles by an insurance company while repairs are underway will be vital to minimising any loss of revenue.

Public Liability Insurance

Businesses whose premises are open to the general public – especially retail and hospitality sectors – are strongly advised to get Public Liability Insurance. This protects a business from claims by members of the public who are injured on the premises, such as from slips or trips.

B2B companies can also benefit from Public Liability Insurance if their clients or suppliers visit their offices or warehouses etc.

Directors’ Liability Insurance

Directors’ and Officers’ Insurance – commonly known as D&O Insurance – covers the management team of a company when it comes to claims that are made against them in the course of carrying out their duties.

D&O Insurance can be used to pay for legal fees incurred in defending against a variety of claims, including breaches of health and safety laws, financial reporting errors, pension maladministration, and director disqualification.

Product Liability Insurance

Businesses that manufacture consumer goods and other products will benefit from Product Liability Insurance. This covers compensation for any injuries sustained by customers or third parties caused by a faulty product.

In addition to injuries, it will cover damage to property, such as when a faulty electrical product causes a fire.

Professional Indemnity Insurance

Businesses that offer a professional service or advice – notably healthcare, legal and financial professions – can be sued if their work results in physical, financial, or reputational harm to clients. Professional Indemnity Insurance can help to cover the cost of litigation and compensation for these types of claims.

Some professions stipulate that their members take out specific forms of Professional Indemnity Insurance as a condition of practising their trade, e.g. the Solicitors Regulation Authority (SRA) requires all law firms to “take out and maintain professional indemnity insurance that provides adequate and appropriate cover”.

Commercial Building Insurance

Businesses that own offices, warehouses, factories, or other buildings will generally have an insurance policy that covers the structure of their buildings. If they have a mortgage on the property, the mortgage company will require Building Insurance cover.

Commercial Building Insurance will cover the cost of repairing accidental damage, such as fire. It will not always cover damage caused by flooding, so this should be discussed with the insurance provider.

Business Equipment and Contents Insurance

Most businesses rely on equipment, at the very least a laptop. Manufacturers often have complex, expensive machinery that is crucial to their production lines. Other businesses will have specialised equipment that often needs to be transported, such as plant machinery for building sites.

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In the case of offices, a Contents Insurance policy will cover against theft of laptops and other technology. A more comprehensive Business Equipment Insurance policy can also cover the cost of repairing or replacing equipment that has broken down or been damaged due to transportation, etc.

Cyber Insurance

One of the biggest threats facing modern businesses is the risk of a data security breach. External malicious hackers and internal sources can compromise confidential client data, trade secrets and other sensitive company information.

Cyber Insurance is designed to cover legal costs, fines, compensation payments, and, in some cases, the cost of repairing reputational damage resulting from a data breach. However, it’s important to carefully review the terms of any Cyber Insurance policies, as they may require specific technical precautions to be taken to make a valid claim.

Business Interruption Insurance

Occasionally, the day-to-day operations of a business may be disrupted by unforeseen events, such as a fire or flooding. Aside from the costs of repairing any damage, which may be covered by other policies such as Building Insurance, there will also be the loss of revenue caused by the disruption. Business Interruption Insurance is designed to reimburse the loss of expected revenue.

This type of policy can vary drastically, so it’s crucial to ensure that the terms are fully understood – and tailored if possible. Looking for business insurance? Get a quote with Markel Insurance and enjoy 10% off your premium.*

*1st Formations introduces customers to Markel Direct to discuss their business insurance needs. The 10% discount is subject to underwriting, eligibility and terms, and may be withdrawn at any time.