Public Liability Insurance for Small Businesses and Start-Ups

 If you want your start-up or small business to carry on trading and/or expand in the long term, it is vital to put adequate insurance in place as early as possible.  That’s because you don’t have to have been trading for long for there to be a fire, flood or theft, or for a customer or member of the public to sue you for negligence.

If you decide to apply for any business insurance, one of the first questions you will be asked (either on the insurer’s website or over the telephone) is what type of business you own.  That will help your insurer to narrow down the types of business insurance that you could possibly require (e.g. they might remove professional indemnity insurance from the list of possible policies on offer if your circumstances mean that such a policy would not be helpful or necessary).   Once the insurer has narrowed down the list of options, you can choose which policies you need and which you are prepared to forego on the basis that you believe that you’re unlikely to ever need to make a claim under those policies.

Some business insurance policies are perhaps more important than others, particularly to a start-up or small business.  For example, if you have any employees, you must have employers’ liability insurance in place or face a large fine (of around £2,000 per day) for the period that you were without cover when you should have been.  You would also incur a criminal record that could affect your ability to trade, gain or keep customers and potentially it could affect your ability to gain credit.  If you or your insurer has ascertained that you need employers’ liability insurance then you must take out a policy of that kind.

Aside from that, perhaps the most important type of insurance for any start-up or small business is public liability insurance.  If you visit clients’ premises (e.g. as a builder or other skilled tradesman carrying out building or repair work, or as an IT expert repairing clients’ computer software or hardware) then you would need public liability insurance in case you did something wrong that meant that your client suffered financial loss or personal injury (e.g. you could ruin your client’s computer motherboard or knock out a supporting wall without inserting an RSJ support; or you could drop a laptop and break your client’s foot, etc.).

But you would also need public liability insurance if your clients visit your premises (e.g. as customers visiting your shop) or if you are located somewhere that passers-by or neighbours might be injured, have property damaged or simply have their peace and quiet disrupted by noisy machinery.  Any of those people could sue if your negligence was the cause of the problems.

Public liability insurance would protect you by paying all the legal fees and compensation that might arise from such a claim being made.  Without it, you would have to pay these from your business’s assets (which are not going to be substantial in a start-up or small business) or from your own assets (including your house).

Once you have public liability insurance in place, you could consider other types of insurance that might be of benefit to your business, such as professional indemnity insurance, key person or business interruption insurance, or business property insurance.

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