Insurance may not be exciting, but it is crucial to cover your business against damage, misfortune or mistakes.
Laura Winter, Head of Insurance Product at specialist insurance provider Simply Business, told us, ‘A single, simple mistake in the course of a trader’s work can be financially disastrous. But just as importantly, traders need effective cover to protect their customers’.
Take a look at our guide to find out more about public liability insurance, and read on for information about the different types of insurance you may need, plus tips on avoiding common errors on insurance documents.
Common mistakes to avoid when taking out small-business insurance
Which? Trusted Traders assesses your insurance as part of the accreditation process. We will check the full documentation, not just the certificate. This allows us to ensure that you have the insurance you need to protect you and your customers.
There are several areas where we often find mistakes. When you take out insurance, you need to:
Ensure you have the correct trading name on your insurance documents. It may sound obvious, but we often see mistakes around company names. Something that might just look like a typo can end up completely invalidating your insurance.
A common mistake is to miss off the ‘Limited’ from a company name. For example: A company trading as ABC Plumbers Limited might have an insurance document where it’s listed as ABC Plumbers. It seems like a small difference – but, in law, ‘ABC Plumbers’ does not have any legal status and cannot really be insured – potentially leaving this company without insurance.
Similarly, for sole traders with a different company trading name, insurance documents must list your actual name as well as your trading name, such as Fred Smith t/a Brilliant Service. Simply listing ‘Brilliant Service’ on the insurance documents means they are not valid
Ensure you have the correct cover for your business. ‘There is no such thing as a one-size-fits-all insurance policy,’ says Laura Winter from Simply Insurance. ‘Instead, traders need to think about the specific risks that they and their clients face during the course of their work, and build a policy that reflects these.’
Ensure there are no endorsements or exceptions that mean you are not covered for the work you do. This means reading the small print. In the past, we’ve found roofers with exclusions for working at height, an international removal company without insurance to drive abroad, and plumbers who had exclusions for using heat, leaving them uninsured if they used heat guns, blow lamps and so on.
Ensure your cover is continuous. Insurers will usually notify you when your insurance cover is due to lapse, but it’s always good practice to make a note of when each policy will expire, so you don’t get caught out.
What type of insurance do you need?
Public liability insurance protects tradesmen and customers against claims arising from a loss or injury suffered by a client or member of the public during the course of their work. This is essential for all traders, and a requirement for any trader accredited by Which? Trusted Traders. To find out more, read our guide to public liability insurance.
Any other insurance you may need will depend on the nature and size of your business. A good insurance broker will be able to help put together specific packages for you. If you would rather find your own insurance, then price comparison sites can be helpful. Read the Which? guide to price comparison sites to find out some of the pros and cons.
Here are some of the most common types of insurance that you and your business may need:
Commercial property insurance
If you own your business premises, the building itself needs insurance to cover against the cost of repair or rebuilding. If you have a mortgage on your business premises, then this will have been a condition of the mortgage – but even if you own the property outright, it’s still worth getting cover. Typically this protects against damage from burst pipes, falling trees, fire, flooding, riots, storms, subsidence and theft.
Contract works insurance
This one is specifically for builders and other traders to cover the cost of repairing or redoing work that’s underway on a site if it’s damaged by an insured event such as fire, flood, storm, vandalism or theft.
If you employ anyone, even on a casual or part-time basis, you are legally obliged to take out employers’ liability insurance. It covers you for the cost of compensation claims if an employee is taken ill or injured as a result of working for you.
‘The fines for failing to take out this cover are significant – they run to thousands of pounds for every day the employer is uninsured,’ says Laura.
Professional indemnity insurance is suitable for businesses that offer advice, a professional service or handle data or intellectual property belonging to a client or business, such as architects, designers or IT contractors. It can cover you if you are found to have made an error in your work, or given the wrong advice to a customer. Customers can claim for any financial or reputational loss they have suffered as a result.
Professional indemnity insurance can cover any compensation, as well as legal costs involved in defending a claim. Sometimes, even if you’ve done nothing wrong, the legal cost of defending yourself can be very high, and professional indemnity insurance can cover this expense.
Tools, stock and business equipment
Losing the tools of your trade could effectively stop you working. You can cover yourself against loss, theft or accidental damage to your tools, stock and business equipment to protect against this eventuality. Some policies will include cover for tools left in a vehicle overnight – something which is typically excluded from standard vehicle policies.
Everyone needs insurance on any vehicle that’s on the road. For tips on getting better deals and reviews of the best and worst insurance providers, check the comprehensive Which? guide to car insurance. Many of these tips will apply to van insurance, too, although there are different rates for business vehicles. Look out for exclusions, such as cover for tools, to ensure that you have the policy you need for your business. Again, price comparison websites can be helpful here.