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Guide to Business Insurance

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Guide to Business Insurance

Guide to Business Insurance


Business insurance may help you head off such disasters with a range of products that helps to indemnify you against some of the all too common risks and perils encountered by just about any type of commercial enterprise.

At GSI Insurance, therefore, we take the protection and ongoing health of your business seriously and have experience and expertise in arranging the insurance cover that helps to maintain your defences against mishaps and misadventures.

In a nutshell, these include:

  • employers’ liability insurance;
  • public liability insurance;
  • commercial property insurance;
  • professional indemnity insurance
  • motor trade insurance; and
  • fleet insurance.

This guide looks at these areas of cover to examine what each of them does, why your business might need the protection offered, and any other considerations you might want to take into account when arranging cover for your business.

Employers’ liability insurance

What is it?

  • if you employ anyone else to help run your business, you have a duty to ensure their health and safety at work;
  • if your actions – or failure to act – result in the injury or ill health of an employee, you are liable to pay them compensation;
  • in order to ensure that you have sufficient funds to meet any such obligation to an employee of yours, the law requires that in practically every case, you hold employers’ liability insurance to cover any successful claim for compensation;
  • reflecting the potential for claims to reach very substantial proportions – especially if life-threatening injuries are caused or an employee suffers long-term ill-health – the law requires you to hold a minimum of £5 million of insurance cover;

Why do businesses need it?

  • because the law – the Employers’ Liability (Compulsory Insurance) Act 1969 – requires it in the case of anyone you employ (with only a few exceptions relating to some family members), as further described in a guide published by the Health and Safety Executive;
  • quite apart from the legal requirement, your business is obliged to pay compensation to any employee who suffers an injury, contracts a medical condition or has their property lost or damaged in the course of their employment with you;
  • whether or not you complied with the law and arranged employers’ liability insurance, the employee still has the right in common law to claim against you for the breach of your duty of care – and any such claim may be substantial indeed;
  • your employers’ liability insurance is designed to meet any such claim – without it, your business might face financial ruin;
  • as the Advisory, Conciliation and Arbitration Service (ACAS) points out, there is a further business case for employers’ protecting their employees right with this type of insurance – it may help to demonstrate your commitment to your workforce, building trust, helping to retain staff and generally motivating them;

Considerations

it is worth noting that a former employee may have a claim against you as an employer long after his or her employment has terminated – if a medical condition develops many years later, which may be shown to have been as a result of their employment by you, there is the basis for a successful claim;
you might also want to bear in mind that the penalties for failing to hold any necessary employers’ liability insurance might prove very costly – currently £2,500 for every day that it is lacking, plus a £1,000 fine for failing to display the certificate proving that you have the appropriate cover.

Public liability insurance

What is it?

  • it is not only your employees who may claim against you if your business activities – or failures to act – result in personal injury or damage to property, but your customers, visitors to your premises and members of the public, too;
  • just as the name suggests, public liability insurance acts to indemnify you against claims that you and your business are liable for any injury or property damage suffered by a member of the public;
    typically, the minimum amount of public liability cover arranged by a business may be £1 million, but limits of £5 million or even more, are by no means uncommon;

Why do businesses need it?

  • there is no legal compulsion for you to arrange public liability insurance;
  • but if you are held liable for an incident in which a member of public is seriously injured – perhaps even dies – or has their property substantially damaged, the claim for compensation may be onerous indeed;
  • if you are facing a significant public liability claim and have no insurance with which to meet it, the financial strain on your business might prove sufficiently substantial as to deal a fatal blow to the financial standing of your enterprise;
  • it is for this reason that a minimum level of cover typically starts at £1 million, but may cover public liability claims of £5 million or more;

Considerations

you might ask why your business may have to face a claim that it is liable for loss or damage to a member of the public;
the fundamental principle of a duty of care is enshrined in English law, following a precedent decided in the case of Donoghue v Stevenson in 1932;
here the judge ruled that each of us (including businesses or corporate bodies) needs to be a “good neighbour” towards anyone who might be reasonably foreseen to be adversely affected by something we do or fail to do – the principle has come to be known as the good neighbour test;
negligence or breach of that duty of care is a public liability and the injured party has recourse to compensation whether or not this is ordered by the courts.

Commercial property insurance

What is it?

  • if you own a commercial property, the building and any contents you own, may be regarded as a business investment;
  • commercial property insurance is designed to safeguard your financial investment by compensating you not only for and tangible loss or damage involving the building and its contents but also to your business interests in owning the property;
  • commercial property therefore includes a wide range of establishments, including offices, workshops, shops, restaurants, hotels, bed and breakfast businesses and hotels;
  • in addition to protection for the structure and fabric of the building and the risk of loss or damage to its contents, commercial property insurance may also extend to safeguarding less tangible risks such as public liability, employers’ liability, loss of rents receivable and provision for related legal costs and expenses;

Why do businesses need it?

  • for many businesses, property is a key to the running of operations and possibly the most significant capital investment in the enterprise;
  • if you own the property to run the business as its landlord, the need to safeguard the structure and fabric of the building, together with its contents, may be self-apparent;
  • but the property may serve as the premises from which or out of which you conduct your business, it might provide the shop window through which potential customers learn about your goods or services, or it might be the office in which you work and run your business operations;
  • in any event, therefore, any loss or damage to such premises threatens a considerable expense and costly disruption to your business;
  • as a landlord of commercial property, you also rely on the rental income you receive from tenants and therefore look to at least some degree of compensation if the premises become unusable after a major insured event;
  • the need for public liability insurance and employers’ liability insurance has been considered elsewhere in this guide;

Considerations

  • when arranging commercial property insurance it is important to envisage a worst case scenario in which the building and its contents are totally destroyed and the premises need to be rebuilt – the total building sum insured reflects this possibility and therefore needs to be based on an accurate and up to date estimate of rebuilding costs;
  • you might also want to take into account whether your chosen insurer offers the option of including accidental damage in the cover you seek;
  • as with certain other forms of insurance, there are typically no claims discounts to be enjoyed if you remain claims free – some insurers may even extend a no claims discount as an introductory incentive to new clients.

Professional indemnity insurance

What is it?

  • if you represent yourself as a professional – providing professional services which offer advice to clients, services handling or managing clients’ data – you have a duty for ensuring that those services are delivered to the best of your ability and to a standard which any member of the same profession might reasonably be expected to deliver;
  • if you make a mistake in your professional advice or judgment or your client is dissatisfied with the service you have provided, he or she is entitled to allege your professional negligence and to claim compensation from you;
  • professional indemnity insurance indemnifies you against such claims – and, perhaps as importantly, provides cover for the potentially very high legal costs involved in defending allegations of professional negligence;

Why do businesses need it?

  • claims of professional negligence may assume quite substantial proportions, threatening the continued existence of your practice or firm and potentially putting paid to your career;
  • a further business case for arranging this indemnity is the confidence and peace of mind it is likely to inspire in your clients – who may be reassured that if anything does go wrong, they stand to receive appropriate compensation;
  • a compelling reason for professional indemnity for many professional practitioners is cited by the website Business Zone and is simply because the law requires them to have it – this includes accountants, architects, financial advisers and solicitors;
  • guidance published by the Institute of Chartered Accountants in England and Wales (ICAEW) also makes clear quite how rigorous are the rules binding its members to the need for professional indemnity insurance even where you are not bound by law to hold professional indemnity insurance, many professional bodies and institutions make it a condition of membership – and without such membership it might be practically impossible to continue to practice;

Considerations

given the clear business case for holding professional indemnity insurance – to protect your own financial interests and for the benefit of clients whose trust and confidence you want to secure – this product is one which might suit a wide range of different businesses;
these include – but is by no means restricted to – the previously mentioned accountants, architects, financial advisers and solicitors and also media and marketing consultants, management consultants, property managers and consultants, IT specialists, surveyors and charity agents.

Motor trade insurance

What is it?

  • motor trade insurance is specifically designed to protect against the particular risks and perils of those working in the motor trade industry – large or small dealerships, MOT test centres or local repair workshops, to name just a few possible occupations and businesses;
  • in short, motor trade insurance is designed to cover those business considerations over and above those you might have for your own domestic use of a motorcar;
  • depending on your particular business needs, therefore, the insurance might cover the premises from which you are operating, the tools and equipment you use, machinery and plant, damage to customers’ vehicles or those you are waiting to sell, and other stock;
  • the cover might also extend to product liability insurance, public liability insurance, and employers liability insurance;

Why do businesses need it?

  • business needs are different to those you might have as the owner of the car you use for social, domestic and pleasure purposes;
  • although motor trade insurance typically includes provision for the driving of vehicles within your control, this is by no means the end of the story – since your business is likely to involve far more than simply driving vehicles on the public roads;
  • the combination of road use and the safeguards you need to protect your premises, tools, plant and machinery, not to mention the responsibilities you have towards employees and members of the public, makes motor trade insurance an especially sophisticated insurance product;

Considerations

  • indeed, you might consider this to be such a sophisticated insurance product that the advice and guidance of a specialist insurance provider may be called for;
  • the experience and expertise of such a broker may be crucial not only in identifying your own particular needs and requirements – there are, after all, very many different types and sizes of business operating as motor traders – but also in singling out those insurers capable of offering what it is you need, at a competitive market rate;
  • some of the critical considerations when it comes to arranging motor trade insurance are likely to include the total annual mileage you and your staff are likely to make when driving the cars under your control, the exact nature and extent of your business and the types of vehicles with which you expect to be dealing – if you are able to rule out such higher risk vehicles as high performance sports cars or heavy commercial vehicles, for instance, your premiums may be reduced accordingly.

Fleet Insurance

What is it?

fleet insurance refers to the practice of insuring more than one vehicle under the same policy, deriving an economy of scale in the cost of premiums for the fleet of vehicles as a whole;
different insurers may have different definitions of what actually constitutes a fleet of vehicles although a useful rule of thumb might be to regard anything more than three vehicles to represent a fleet;

Why do businesses need it?

  • reliable and efficient transport is the key to success of many businesses;
  • to keep any vehicle on the road, there is a legal requirement to have at least third party insurance, but the value of most business vehicle is such that more comprehensive forms of insurance are required;
  • it is not only the business whose central role is road transport – such as a haulage contractor, for example – but also any enterprise relying on the delivery of its goods and products by trucks, vans or cars;
  • given the central role played by your road delivery system, the legal obligation for arranging insurance and the business case for insurance to protect your investment in the vehicles working for your business, fleet insurance represents a convenient way of managing all your vehicle insurance needs under the same umbrella;
  • in this way, you are spared the hassle and administrative expense of annually renewing the insurance for individual vehicles, but may keep them all fully up to date on the same renewal date;
  • the most compelling argument for arranging fleet insurance, however, is that it is simply cheaper than insuring each vehicle independently and separately;
  • it is not difficult to make a sound business case for any arrangement that helps to reduce your overhead costs – in this case the ongoing expense of vehicle insurance;

Considerations

  • one of the factors you might want to take into consideration when arranging fleet insurance is your insurer’s ability to extend cover to a mixed fleet of vehicles – from HGVs, to light trucks, company cars and even your own private motor car;
  • the greater the flexibility and the more vehicles you are able to include under the same umbrella insurance of course, the more you are likely to save.

Summary

Business insurance is an umbrella term for a wide range of products which address particular risks and perils to which a range of different businesses may be exposed.

Some businesses may be able to make a case for the protection afforded by all of the different types of cover mentioned in this guide; others might need only one or two of them.

If one thing is certain, however, it is that your failure to arrange the business cover relevant to the particular risks encountered by your own enterprise may result in very significant claims against you or crippling losses in terms of the assets employed to operate your business.

Some businesses may find it financially too onerous to recover from the claims made or the losses experienced and simply sink beneath the commercially highly competitive waves.

You might want to give serious thought to avoiding such a fate by arranging the business insurance – or insurances – necessary for your particular enterprise.

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