Guide
Business insurance: what you need
Understanding mandatory and recommended insurance for your business, including employers' liability, public liability, professional indemnity, and sector-specific cover.
Insurance protects your business from financial losses due to unexpected events. Some insurance is legally required, while others depend on your business activities, sector, and contracts with clients.
Do you need business insurance?
The insurance you need depends on several factors:
- Your employees: If you have staff, employers' liability insurance is mandatory
- Your sector: Construction, hospitality, and healthcare have specific requirements
- Your clients: Many contracts require proof of public liability or professional indemnity
- Your premises: If you own or lease property, buildings and contents insurance protects your assets
- Your risks: Business interruption and cyber insurance protect against modern threats
Mandatory insurance
Employers' Liability Insurance
If you have employees, employers' liability (EL) insurance is a legal requirement under the Employers' Liability (Compulsory Insurance) Act 1969. You must have this insurance from the day you hire your first employee.
Insurance types explained
The snippet below covers all main insurance types - what's mandatory, strongly recommended, and optional - with typical costs and cover levels.
Construction-specific insurance
Beyond standard cover, construction businesses typically need Contractors' All Risks (CAR) for projects and materials, plus Plant Insurance for equipment. Higher Public Liability limits (£5-10m) are usually required by clients.
Not legally mandatory, but almost always required by client contracts and principal contractors.
Hospitality and food business insurance
Food businesses need Product Liability cover for food poisoning, allergic reactions, and contamination claims. Check your Public Liability policy explicitly covers food products. Consider Equipment Breakdown cover for commercial kitchen equipment and stock spoilage.
Insurance often required by commercial leases, premises licenses, and trade associations.
Tech sector insurance priorities
Tech businesses should prioritise Professional Indemnity (£1-5m cover) for software bugs, project delays, and scope disputes. Cyber Insurance is increasingly essential for data breaches, ransomware, and business interruption. Consider IP Insurance for defending or enforcing intellectual property rights.
Client contracts typically require PI (£1-5m). FCA-regulated fintech has specific requirements. Data breaches can trigger ICO fines.
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Assess mandatory requirements
If you have employees (or plan to hire), budget for employers' liability insurance immediately. It's the law.
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Review client contracts
Check what insurance your contracts require. Public liability (£5m) and professional indemnity (£1m-£5m) are commonly mandated.
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Compare authorised insurers
Use the Financial Conduct Authority (FCA) register to verify insurers are authorised. Consider using a British Insurance Brokers' Association (BIBA) broker.
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Don't just buy the cheapest
Compare policy terms, exclusions, excess amounts, and claims-made vs occurrence basis. Cheap insurance may not cover you when you need it.
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Maintain continuous cover
Especially for professional indemnity (claims-made basis), ensure no gaps between policy renewals. Set renewal reminders well in advance.
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Review annually
As your business grows, your insurance needs change. Review cover levels annually and after major business changes (new premises, more staff, new services).
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Keep certificates accessible
Display EL certificate where employees can see it. Keep all insurance certificates accessible for client requests and contract compliance.
How to assess what insurance you need
Follow this systematic approach to identify your insurance requirements:
Step 1: Identify mandatory insurance
- Do you employ anyone? → Employers' Liability Insurance (£5 million minimum)
- Do you use vehicles for business? → Motor Insurance (business use cover)
- Are you in a regulated profession? → Professional Indemnity Insurance (check your professional body requirements)
Step 2: Check contractual requirements
- Review client contracts - do they require Public Liability or Professional Indemnity?
- Check your commercial lease - does your landlord require insurance?
- Review supplier agreements - do venues or partners require proof of cover?
Step 3: Assess your business risks
- Customer interaction: Do customers visit or do you work on their premises? → Public Liability
- Products: Do you manufacture or sell physical goods? → Products Liability
- Professional advice: Do you provide consulting or specialist services? → Professional Indemnity
- Data handling: Do you hold customer data or process payments? → Cyber Insurance
- Business assets: Do you have expensive equipment or stock? → Contents Insurance
Finding and comparing insurance
Where to get business insurance
1. Direct from insurers - Major insurers offer online quotes for small businesses. Suitable for straightforward cover.
2. Through insurance brokers (recommended) - Access multiple insurers, specialist sector knowledge, help with complex policies and claims.
3. Trade association schemes - Many trade bodies negotiate group deals for members, often cheaper than individual policies.
Getting quotes
When requesting quotes, provide accurate information about business activities, turnover, employees, premises, and claims history. Always get at least 3 quotes - premiums vary significantly.
Check the insurer is legitimate
Only buy from insurers regulated by the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA). Check the FCA register.
Understanding policy terms
Excess
The amount you pay towards each claim before the insurer pays. Higher excess = lower premium.
Indemnity limit
Maximum amount the insurer will pay. Can be "per claim" or "aggregate" (total for all claims). Ensure you're not under-insured.
Policy exclusions
Situations not covered - read these carefully. Common exclusions: deliberate acts, fines, pre-existing issues.
Retroactive date (Professional Indemnity)
PI typically covers claims made during the policy period for work done after the retroactive date. If switching insurers, ensure no gap in cover.
Making a claim
- Notify your insurer immediately - Most policies require notification within 30 days. Late notification can void claims.
- Gather evidence - Photos, witness statements, police/incident reports, financial records.
- Don't admit liability - Provide facts but let the insurer assess liability.
- Complete claim forms accurately - Don't exaggerate losses.
- Cooperate with the process - Respond promptly to insurer requests.
If your claim is rejected
Ask for written reasons, review your policy terms, use the insurer's complaints process, then escalate to the Financial Ombudsman Service if unresolved (free service).
Keeping insurance costs down
- Improve your risk profile: Robust H&S policies, security measures, fire safety
- Maintain claims-free record: Good history significantly reduces premiums
- Choose appropriate cover levels: Don't over-insure, but meet mandatory minimums
- Pay annually: Monthly payments often include 5-20% interest
- Bundle policies: Combined packages offer 10-20% discounts
- Use trade association schemes: Group insurance is often cheaper
- Compare annually: Don't auto-renew without checking competitor quotes
Insurance checklist by business type
Sole trader (no employees)
- ✅ Public liability (if customer-facing)
- ✅ Professional indemnity (if providing advice/services)
- ✅ Contents insurance (for equipment)
- ❌ Employers' liability (not needed unless you hire staff)
Employer (any size)
- ✅ Employers' liability (mandatory)
- ✅ Public liability
- ✅ Professional indemnity (depending on services)
- ✅ Buildings and contents
- ⚠️ Business interruption (recommended)
Construction contractor
- ✅ Employers' liability (if employees)
- ✅ Public liability (high cover - £5m-£10m)
- ✅ Contractors' All Risks (CAR)
- ✅ Plant insurance (if you own/hire equipment)
- ✅ Professional indemnity (for design/build contracts)
Retail or hospitality
- ✅ Employers' liability (if employees)
- ✅ Public liability (including product liability for food)
- ✅ Buildings and contents (stock, equipment)
- ✅ Business interruption (essential for revenue protection)
- ⚠️ Cyber insurance (if taking online orders/payments)
Tech/IT consultant
- ✅ Employers' liability (if employees)
- ✅ Professional indemnity (£1m-£5m)
- ✅ Cyber insurance (highly recommended)
- ✅ Contents/equipment (laptops, servers)
- ⚠️ Public liability (if visiting client sites)