HM Insights

Important types of insurance for small businesses

For over a year we have all looked forward to the day when the lockdown level would reach 0, and now, on 9 August Scotland moves beyond Level 0.   Will it affect your business? Are you ready? 

We have all been looking forward to the day when things can return to “business as normal”, or a newer, hopefully better version of “normal”.  9 August is another step in that direction as Scotland moves beyond Level 0.  For now the Scottish Government continues to advise home working where possible, recognising that some staff will start to return to offices in line with staff wellbeing discussions and business needs. They are encouraging employers to consider for the longer term, as the Scottish Government is doing, a hybrid model of home and office working - which may, of course, have benefits beyond the need to control a virus.

Despite any evolving guidance that may follow there are some constants that remain - risk, liability and insurance.

In the rush to “get back to normal” don’t forget to plan ahead and guard against risk.  Machinery and equipment may have been dormant for months, or perhaps operating at a reduced output level.  What testing and assessments will need to be done before it can safely be made operational or increase its output?  What about sites and business premises, could they have been altered without the usual day to day upkeep and pose health and safety risks to staff or members of the public?  Will staff remember their health and safely protocols and procedures?  What training will they need? 

As you look ahead to exit hibernation of your business, or consider any changes to home working, do you have the right insurance in place to go forward?

Two of the most important types of insurance for small businesses are employer liability insurance and public liability insurance.

Why do I need Employer Liability Insurance?

Anyone running a business is responsible for the health and safety of their employees whilst at work. Employer Liability insurance protects businesses from the cost of compensation claims arising from employee injury sustained during the course of their employment with the business.

By law, most businesses with one or more employees are required to have employer liability insurance with cover for at least £5 million with an authorised insurer. There are very few exceptions. Failure to have this type of insurance can result in a fine of up to £2500 per day. You can also be fined £1,000 if you do not display your certificate or refuse to make it available Not only can the business be fined but it is then also responsible for paying the compensation claim.

Given the nature of many accidents at work, the claims can be worth tens of thousands of pounds and sometimes more, and that is before taking into account any solicitors’ fees.

Public Liability Insurance

Public Liability insurance is generally voluntary. However, a prudent business owner should also consider having this type of insurance in place. It is particularly important if your business involves customers or other members of the public coming onto your premises or being exposed to risk.

Public Liability insurance can cover compensation claims for injury or property damage to third parties such as customers, suppliers or any other member of the public who comes into contact with your business.

For example, if a customer enters your premises and trips on a loose bit of carpet and injures themselves, they may make a claim for compensation against your business. Again, failure to have this type of insurance would mean that the business would be obliged to meet any compensation claims and legal costs.

If a claim is made against my business do I have to appoint the legal advisers my insurer wants me to?

Some policies will allow you to nominate your own solicitor from the start, providing that the chosen solicitor accepts the insurers terms and conditions. Other policies will dictate that you accept a solicitor from their panel. However, there are only a few circumstances when an insurer can refuse a policyholder's right to choose their own solicitor.

Plan ahead

Planning ahead will help business in a way that is both productive and safe.   The alternative could see a significant increase in accidents and injuries at work so we caution everyone to exercise care and caution.