1 SME BUSINESS INSURANCE MADE SIMPLE Working with the profession to simplify the language of insurance
2 PUTTING INSURANCE TO WORK Business insurance is about protecting your livelihood. For SMEs in particular, this means making sure the time, effort and resources you invested in developing your business don t go to waste. Finding the right cover for your growing business can give you peace of mind your income and investment is safe. Whether it s physical damage to your business property and equipment, or paying compensation to a customer who s been injured by one of your products you need insurance to cover the costs. Whatever your business you need insurance
3 Insurers provide a wide range of policies, each developed to meet the specific needs of small businesses like yours. Here s what you need to know Why do I need business insurance? By law, there are some types of business insurance you have to have, like cover for injury to an employee at work. Other kinds are optional, but most are worth having, depending on the nature of your business. All businesses face risks, every day, some of which can cause significant loss of income if you don t insure against them. If problems do arise, insurance provides the financial help to support business as usual, or at very least, to make life a lot easier while you get it back on track. For example, it will cover the cost of repair or replacement of damaged property, and help you meet any legal responsibility to pay compensation claims. Be aware: If you operate your business from home, your standard home insurance policy may not be enough to protect your business needs. If you haven't told your home insurance provider that you work from home, your policy might be invalid. If you operate your business from home, your home insurance may not protect your business
4 Insurance required by law Employers liability this protects you if a person you employ suffers injury or death while they re working for you. If you employ anyone, you must have employers liability insurance, or you could face a hefty fine. There are only a few exceptions, such as if you run a family business, and you and all employees are closely related. If you re not sure about anything, there s plenty of advice on the Health and Safety Executive website: hse.gov.uk/simple-health-safety/get.htm. By law, your insurance must cover at least 5 million, but most policies offer at least 10 million. Did you know? You face up to 2,500 in fines for each day your business doesn t have employers liability insurance.* And you must display your insurance certificate where people can see it online or on the wall or both or you may be fined up to 1,000.* Your policy will cover all employees, including contract, casual and temporary or seasonal staff, as well as students or others on work placements. If your business uses volunteers, advisors, referees or marshals, you should tell your insurer you want them to be covered. *Source: Employers Liability (Compulsory Insurance) Act 1969, A brief guide for employers (HSE): hse.gov.uk/pubns/hse40.pdf Engineering insurance this covers many items, such as boilers, lifts and lifting machinery. These must be inspected regularly by a qualified person. Talk to your insurer about what cover best suits your needs, and whether to include cover in case these items are damaged or break down.
5 Motor insurance you must have at least third-party cover if your business uses motor vehicles. If someone is injured or killed, or their property is damaged, in a collision you or an employee causes, this insurance covers the cost of paying the associated claims. By law, this insurance must cover at least 1 million for property damage, and an unlimited amount for personal injury. Higher levels of cover are available, including Third-Party, Fire and Theft, which as it suggests, gives you additional protection against loss of or damage to your own vehicle caused by fire or theft. Comprehensive motor cover also provides cover for your vehicles against accidental or malicious damage. In addition, comprehensive policies will often cover personal belongings left in your vehicles and medical expenses, and may provide personal accident cover for example, if the driver dies or loses their eyesight. They may also cover tools carried in connection with your business. Did you know? Many motor policies come with a 24-hour accident recovery helpline, and provide courtesy vehicles while your vehicle is being repaired. Be aware: If your business owns or leases vehicles such as vans, taxis, coaches, or vehicles used for farming or construction, you will need a specialist policy. Specialist vehicles will require a specialist policy
6 Optional insurance You can also choose from a range of additional insurance policies to give your business added protection. Business insurance policies often combine several different types of cover into one policy, with options to suit your specific requirements and circumstances. Property damage this covers your buildings, machinery, stock and other business equipment for the cost of repairing or replacing items damaged by, for example, fire, flood or vandalism the list is extensive, but always ask your insurance provider or check your policy for full details. Tip: If someone else owns the building your business is in, you should check with the owner that the building is insured, to minimise any effect on your business caused by, for example, fire or flood. Tip: Some policies provide all risks cover that includes theft and accidental damage, but make sure you know about any exclusions. You should insure your business premises for the full cost of rebuilding them, including any professional fees and the cost of clearing the site. The full cost of a rebuild is often very different to the premises market value. Contents should be insured for the cost of new replacement items. The figure you choose becomes the sum insured the maximum amount the insurance company will pay in the event of a claim so make sure this is enough to cover the cost of rebuilding your property or replacing all your contents if they are damaged irreparably. Some insurers won t ask for a sum insured. Instead they provide automatic cover up to a set limit. However, it s still your responsibility to make sure this is adequate.
7 Money insurance this replaces money lost or stolen while on your premises or in transit. It may also make a lump sum payment if you or an employee is assaulted and injured while carrying your business money. Goods-in-transit insurance this pays for goods lost, stolen or damaged while in a company vehicle or with a carrier. There may be a limit on how much is covered for each vehicle, or per batch of goods. Cyber insurance (also known as e-risks insurance) this covers loss or damage to digital assets or software caused by viruses, hackers and other forms of cyber crime. It can also protect your business against electronic theft, the costs dealing with security or privacy breaches, or loss of third-party data your business holds. Protect your digital assets and software
8 Protection against financial loss Business interruption insurance this covers you for periods when you can t conduct normal business due to an event that causes damage to property on your premises. Did you know? The UK is increasingly at risk from flash floods in localised areas. This has put many pubs, shops, restaurants and services out of business in the last few years.** Business interruption insurance is designed to protect you against this kind of thing it will cover a shortfall in income, as well as any increased costs of running the business, such as renting alternative premises. Some policies will also cover other events that disrupt your business, such as damage at the premises of a supplier or customer or outbreaks of disease or food poisoning in the area. Trade credit insurance this protects your business against the risk of customers not settling debts to you. It may also include free services such as assessing your customers credit worthiness, or debt collection. Employee dishonesty/fidelity guarantee insurance this protects your business against employees stealing money or stock. **Source: simplybusiness.co.uk/insurance/business-interruption-insurance/ Get protected for business interuption even flash floods
9 Protection against compensation claims and legal action You must have employers liability insurance, by law, but there are other covers available for added protection and peace of mind: Public liability cover this helps you deal with the cost of compensation to third-parties for death, injury or damage to their property as a result of your business activities where you are at fault. A third-party is anyone your business has contact with other than its employees, including visitors, and even passers-by. For example, you are covered if a visitor to your premises slips on a wet floor and breaks an arm or if an employee working in a public place leaves equipment lying around, and someone trips over it and hurts themselves. It s not usually compulsory, except for businesses affected by specific legislation, such as riding schools. But without it, your business could end up in severe financial difficulty if someone claims. Products liability this covers compensation paid to anyone injured, or whose property is damaged, because of a fault in a product you design, manufacture or supply. For example, an electrical fault that causes shock or fire, or a loose component. Note that products liability insurance only covers compensation and associated legal costs it doesn t include the cost of replacing the defective product. Did you know? You can be held liable for faulty products, even if you didn t manufacture them for example, if your business name is on the product, or if you imported the product from outside the EU or if you can t identify the product s manufacturer, or they ve gone out of business. Products liability policies don t cover contractual liability. If your business signs a contract that makes you responsible for injury or damage you wouldn t otherwise be responsible for, you need to talk to your insurance provider about adjusting your level of cover accordingly.
10 Professional indemnity insurance protects professional people against claims their clients make for injury or loss that arises from failing to carry out professional duties in a proper manner. For example, an investment consultant may give incorrect advice, causing a client s financial loss. Here s a real-life example a director signs a cheque that doesn t include the word 'limited', and the cheque bounces. By the time the corrected cheque is presented, the company has gone into liquidation. The Managing Director is held personally responsible for the cheque s value in this case, over 30,000.* Professionals such as solicitors, accountants, financial advisors, architects or surveyors need this cover, and their industry regulator will often require it. *Source: perkins-slade.com/for-your-business/d-o-insurance /d-o-claims-examples Directors and officers insurance is a more recent phenomenon, and reflects a growing trend of claims against individual directors and senior managers of a company for example, by shareholders, investors, employees or regulators. It provides protection where a director or officer has failed to carry out the specific duties and responsibilities associated with their role with the expected level of care and skill. Legal expenses insurance sometimes called legal protection insurance, is designed to cover the costs of legal advice and representation if you make a claim against someone else, or find yourself being sued for example, in an employment tribunal. This includes solicitors, barristers, accountants and expert witnesses fees, as well as court costs and opponents costs awarded against you. It s worth having peace of mind that your legal fees are covered, and most legal expenses policies also include a 24-hour helpline for free advice about all types of disputes.
11 Other extras Personal accident and sickness insurance pays an agreed sum if you or one of your employees cannot work because of an accident or illness. This is especially valuable if you are self-employed and would have no income if you became disabled or sick. Payments are usually made for a maximum of one or two years. Your policy may also pay a lump sum to a specified beneficiary, if you or one of your employees dies or if a serious injury at work means they can t work any more in their role. You can choose which employees to insure. Business travel insurance covers things like medical expenses, cancelling or cutting short a business trip, and loss of money or baggage. It usually includes a 24-hour medical emergency helpline. Deterioration of stock insurance this covers the costs of replacing the contents of freezers following unforeseen changes in temperature for example, following a lengthy power cut. Loss of licence insurance covers the costs associated with the non-renewal or withdrawal of a licence to trade, such as an alcohol licence. Insure your employees against accident or illness
12 How do I know what cover I need? How much will I pay? Choosing the right cover depends on your profession or trade. Insurers have developed a wide range of policies, each tailored to suit the specific needs of small businesses. So there are different policies for offices, shops, hotels and guesthouses, contractors, salons and surgeries, and more. Each policy type includes all the key areas of cover automatically, and has pre-set sums insured/limits but you may also have some flexibility to amend cover to your individual requirements. Premiums for business insurance vary according to many factors, such as the nature of your business, your annual turnover, the number of people you employ, your health and safety record and your insurance claims history. Tip: Motor insurance is not usually provided as part of any SME business insurance package, so you ll most likely need to arrange this separately. You might get discounted premiums if you re a member of a trade association, or have taken additional security measures such as locks and alarms. Different insurers offer different policies, so always check the summary of cover before you buy, to make sure it meets your needs. When you give insurers this information, it s important to be as accurate as possible. False or inaccurate information can invalidate your cover.
13 How to buy the best policy You can buy cover direct from an insurer, or through an intermediary such as a broker, consultant, bank or building society. Or you can use internet comparison websites to shop around. Don t buy a policy based solely on price. It's tempting to go for the cheapest policy, but scrimping on your insurance may prove costly if you have to claim. Choose a policy that offers good value, but most importantly, one that provides the cover you need. You can reduce your premium by negotiating your excess (the amount you can agree to pay towards any claim). The higher the excess, the lower your premium. But don t just raise the excess to save money on premiums. Work out a sensible balance.? Shop around for the best policy for your business
14 Remember if you have any questions about SME Business Insurance, just ask me, Ciindy /AskCiindy