Advice on Business Insurance
Why buy Business Insurance?
Businesses usually have a considerable amount of capital tied up in premises and stock. Business owners usually want to protect themselves against the possibility that they might be damaged or lost in some unexpected event, such as a theft, or a fire, or due to bad weather.
If you have a mortgage on your property, it is usual for a building society or bank to insist that the buildings are insured for their full value as a condition of them granting you the mortgage.
What is covered?
This is where it gets difficult! It is important to get advice from your local Coversure franchiseholder as to assessing your needs for insurance.
Shops and small offices can get “package” insurance. The different sections in these policies provide cover for buildings, contents and stock. You will need to break down the valuations of your contents and stock depending on your trade. Generally insurers want to know the values of any tobacco, wines and spirits, frozen food and other “high risk” stock separately from lower risk stock and fixtures and fittings.
More complex businesses, such as warehouses and factories, may need a survey before insurance can be taken out. The risk will be assessed in terms of the various hazards of fire, and health and safety issues, as well as the valuations of the property and its contents. These larger risks are covered by policies which are known as “commercial combined” policies.
Both small packages and commercial combined policies can typically provide cover for buildings, contents, stock, money, liability to employees and visitors, goods in transit and maybe business interruption.
Some specialised insurance needs will be met by separate policies. For instance “key man” policies can be taken out to compensate the business in the event that a key employee becomes sick or dies. Another example would be a “directors and officers” insurance policy, specifically designed to pay for legal costs associated with allegations of a wrongful act committed by either a director or an officer of a company.
There is a marvellous assessment tool on the business link website which will allow you to answer a number of questions and will then tell you what insurances are mandatory for your business, and what insurances are recommended for your business. You can find it here.
What is not covered?
Accidental damage to your buildings or property will not normally be covered unless you purchase it as a separate option.
There will be a policy excess, which will be an amount of money which you will pay in the event of you having a claim. Typically this will be £50 for any claim except for subsidence, where it may be £1000.
What does it cost?
Impossible to say. It will depend on the values and type of stocks that you hold, the type of trade that you carry out and so on. Most insurers have a rate per £1000 for each of the different risk types and these are added up to provide the overall cost.
What to watch out for?
If you buy a package policy, do be aware that the package may not fulfil all of your insurance needs. For instance, these policies typically do not provide cover for legal disputes. A legal protection policy is an inexpensive way of filling this gap and will provide you with access to legal advice and representation for employment disputes, tax investigations, disputes with customers, disputes with licensing authorities and so on.
Check the amount of liability cover that you need. Most packages provide public liability insurance of up to £2 million. However you may do business with organisations or in such a way that will require you to have liability insurance of more than this. For example, if you have a café and put tables on the pavement on nice summer evenings, your local authority may have rules that require you to have £10 million of liability cover. You can buy an “excess layer” to cover this.
If you are a tenant, don’t overlook the fact that most commercial property leases are “full insuring and repairing” leases. This means that you are responsible for the cost of insuring the buildings, even though you are not the owner.
Some policies index link the cover that they give you so that you don’t have to think about reviewing the cover every time the policy comes up for renewal.
Banks will often lead you to believe that you must purchase business insurances from them if you have a mortgage with them. This is not true, but they should be mentioned on the policy as having an interest in the property. They may charge a fee for “checking” that a policy not supplied by them is suitable.
Banks especially like to pressurise businesses into taking out insurances with them even when providing only basic banking facilities. Be aware that you are likely to get better value and better advice from a broker than from a bank.
This is just an introduction to business insurance and is not intended to be representative of the covers or restrictions offered by any particular insurance or that all insurance provide the protection described. You can get a recommendation for a particular insurance to suit your own circumstances by talking to the skilled staff at any Coversure office.