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9 types of small business insurance in the UK

Business partners looking at insurance documents

At the beginning of 2022, there were 5.47 million small businesses and 35,900 medium-sized businesses in the UK. We’re guessing that you’re reading this blog because you’re one of them. 

5.5 million SMEs is a staggering statistic, and it begs the question: How can they all stay safe and stay in business for longer? 

And, closer to home, what actions can you take as a small business owner to reduce your risks, be less vulnerable when mistakes happen, and do the right thing for you, your staff, clients, suppliers, and the public? 

First up, get insured. 

The small business insurance you’ll need depends on several factors which include: the industry or trade you’re in, what kind of assets and liabilities you have, whether you employ people or not, the size of your business, and your attitude towards risk. 

Insurance asks: what if? What if we make a mistake? What if someone gets hurt? What if our property gets damaged? What can we do when things go wrong? And how can we be confident our assets, cashflow and reputation are protected?

Before we continue: this blog includes information that is general in nature only and you should always seek specific advice from a professional for your situation. 

So, let’s look at the top 9 types of small business insurance and why you should consider them.

First up – here are the compulsory types of small business insurance. Next, we’ll move to optional insurance cover

1) Employer's Liability insurance

If you’re a UK employer, you must have employer’s liability insurance to cover your people for a work-related injury or illness. The cover includes paying your employee’s wages while they’re unable to work and any medical expenses and rehabilitation costs. 

You can be fined £2,500 every day you are not properly insured so be sure to get this sorted in time. 

2) Motor vehicle insurance (only applicable if your business has a vehicle, but compulsory if you do)

If your company owns a vehicle or several vehicles, you’re legally required to have small business car insurance. 

This policy will cover compensation costs in the event people are injured or killed when your company vehicle is involved in an accident, and also costs for damage to third party property which arises from the use of the motor vehicle. 

Let’s move on to small business insurance cover that’s not compulsory but still important to consider

3) Public Liability insurance

As a small business owner, we’re sure you do all you can to protect the safety of your customers, suppliers, and the public. But mistakes and accidents do happen. 

Some contracts with landlords, suppliers and customers stipulate that public liability insurance is compulsory. These are the most common reasons why you would need it.

  • You own a premises where your clients frequently visit
  • You go to other people’s premises for your work
  • You run off-site activities or events that the public attend
  • You run your business from home and people come to your home for business related reasons 

If your products or services cause harm to people or to property, you could be liable to pay for compensation and your legal fees to defend yourself. Claims like this can destroy a small business because costs can run into hundreds of thousands of pounds. Examples of when you can claim include the following. 

  • A client or member of the general public has visited your place of work and they have tripped over a wire or slipped on a wet floor
  • You damage someone's property by dropping it or spilling a drink on it

Public liability policies include:

  • cover for legal and defense fees
  • compensation for personal injury
  • compensation for property damage
  • the option to extend to product liability and negligence claims

4) Professional Indemnity insurance

If you’re in the business of providing a professional service or advice, you should seriously think about small business professional indemnity insurance. 

Let’s face it - that definition is broad. You could be a chiropractor or consultant; health professional or lawyer; graphic designer or accountant. 

Small business professional indemnity insurance protects you, as a professional, against damages and legal costs associated with defending yourself against claims raised by your customers. 

Your clients may seek compensation after they’ve experienced financial loss and allege that happened because:

  • you made a mistake
  • you overlooked or omitted a critical piece of information
  • you misstated a fact or provided misleading advice
  • you lost some important documentation
  • you failed to meet a deadline
  • you unintentionally defamed someone
  • they misinterpreted your advice or service.

Without small business professional indemnity insurance, going through the process of repairing the damage caused by an act, omission or breach, is costly, stressful and could severely damage your reputation and finances. 

Professional indemnity protects your assets, reputation, and your financial situation. It does this by covering investigation costs, legal costs, and damages awarded to your client (to the value of your policy cover).

Although it’s not compulsory across the board, many professions require you to hold a professional indemnity policy so you can deliver your services.  

5) Stock and Asset insurance

If you have physical assets, it’s wise to cover them. You can take out insurance to protect your stock, building, contents, tools, and general property from financial loss due to loss, malicious damage, fire and theft, and natural events like lightning, storms and floods.

6) Business Interruption insurance

Protecting your assets often isn’t enough. 

You also need to know that your cash flow and income are taken care of should the worst happen. Business interruption insurance covers the costs of rent or mortgage payments, and your fixed utility charges (electric, gas and water bills) due to the damage and disruption caused by events like a fire, storm, theft or even a burst water pipe.

7) Directors and Officers insurance

None of us wants to dwell on this fact: sometimes people we thought we could trust behave unethically or illegally. If you’re not properly covered for this risk, you could be vulnerable to losing your business and your personal assets.

Management liability insurance protects your company and the people running your company. Should a senior manager or company director behave – or face an allegation of behaving – unethically or illegally which results in an individual or business loss.

It may include behaviours like:

  • health and safety breaches
  • sexual harassment
  • unfair dismissal
  • defamation

Management liability also protects your business from dishonest acts carried out by your employees – for example, theft of stock or fraud.

8) Cyber Liability insurance

Does your business have a website? Do you store sensitive information?

Chances are you’ve answered yes to at least one of those questions. The good news is cyber liability insurance protects you in the event of a cyber attack and covers the cost of keeping your data secure.

Hackers may deface your website which is not only upsetting but disruptive and financially damaging too. They may also get into your database and access sensitive data. A cyber liability claim will take care of the expenses incurred from the disruption to your business caused by a cyber attack.

9) Tax Investigation insurance

You never know if your business will be subject to a random inspection or an investigation by HMRC. If you get contacted by HMRC, it can be time-consuming, stressful, and expensive to manage and pay for completing the audit yourself.  

Instead, tax investigation insurance gives you peace of mind by covering the costs incurred during an investigation such as the professional fees from accountants, lawyers and bookkeepers. 


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Next steps – talk to a professional for personalised advice on your small business situation

Now that you’ve familiarised yourself with the main types of small business insurance cover, it’s time to take the next step. You can choose to buy insurance policies directly from the insurer or talk with an insurance broker.

An insurance broker is particularly helpful if your business needs are complex and you have to manage multiple high-risk scenarios. They can give you specific advice based on your situation and the type and level of cover you need.

A lot of insurance companies provide bundles or packages, which can be cheaper than buying individual policies. Some bundle policies are based on the industry you’re in.

Don’t feel pressured to take insurance or become over-insured. But you do need to weigh up the cost of insurance premiums against the cost of repairing the damage when things go wrong. Even one claim could ruin a small business that doesn’t have adequate insurance cover.

We’ve got your accounting covered – get in touch with Beany today.

Beany works with hundreds of small businesses across the UK who care about protecting what matters the most and growing their business. We take a forward-looking approach, to help you feel empowered with the right financial information at the right time. 

We believe that your accountant should be on your side, supporting you to make decisions that are right for you and your business.

We have a dedicated team of remote accountants to take care of your business no matter where you are, so you can focus on growing your business. We remove the “fluff”, break down barriers, and get things done. Looking out for you is what we’re all about. Get started for free today.

Katie Rickson

Katie Rickson

Freelance Copywriter and Editor

Based in the beautiful town of Helensville in Auckland, New Zealand. A soft spot for long-form content, she loves writing blogs, case studies, and white papers for specialists and service-based businesses. She is also a mum and enjoys acting, dancing and writing poetry. 

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