If you run a small business you will need to check what types of insurance you need. There are legal and financial consequences of not having appropriate insurance policies in place which you should be aware of.
Insurance and liability law basics
In running a small business, you face a range of potential liabilities. You have certain legal duties to any employees you have for example. You may also face unexpected costs and legal claims from suppliers, clients and members of the public.
Having the right insurance policies can limit your financial exposure to such liabilities, help you deal with unexpected events and costs and keep you compliant with the laws and regulations that apply to your sector – so it’s important you understand the law around insurance and liability.
You may need information on insurance and liability law if you are:
- Starting a business
- Using vehicles in carrying out your business
- Changing the structure of your business (e.g. incorporating)
- Changing the premises of your business
- Employing people, or are looking to take on new employees
- Working in an industry that requires specific forms of compulsory insurance – or are expanding into one
- Operating in the environmental services sector
- Selling products and services (including online)
- Subject to a claim from a client or employee who has suffered a loss or injury
- Looking for protection against financial risk
Insurance and liability issues
Many areas of insurance and liability law can apply to a small business. Below are links to free online information about some of the most common insurance and liability issues.
Insurance for small businesses
Overview of insurance for small businesses
Insurance for Small Businesses: a guide to protecting your business – Association of British Insurers guide, including the legal requirements and options when it comes to insurance.
Introduction to business insurance – Startups.co.uk on the importance (and types) of insurance for small businesses.
Business insurance: the basics – Smarta guide to what insurance your business must have and other policies.
Protecting your employees
Employers’ liability insurance
The law on employers' liability insurance – Government guide to the legal requirement for employers’ liability insurance.
Employers’ liability insurance: what it covers, when you might need it and how to buy it – Association of British Insurers guide.
Health and safety made simple – Health and Safety Executive guide to requirements and exemptions to employers’ liability insurance.
Insurance to protect your employees
Insurance you can offer your employees – Association of British Insurers on the insurance you can buy as a benefit for employees.
Insurance for company directors – Association of British Insurers on insuring directors and officers in your business.
Insurance for professional service providers
Professional indemnity insurance – Association of British Insurers guide to professional indemnity insurance.
Health and safety legal requirements
Workplace health and safety – Association of British Insurers on how insurers can help.
Health and safety ABC: an easy guide – Health and Safety Executive tools to understand health and safety requirements.
Protecting your assets
Commercial motor insurance – Association of British Insurers guide if your firm uses motor vehicles.
Compensation and legal action
Public liability insurance: what it covers, when you might need it and how to buy it – Association of British Insurers guide.
Product liability insurance: what it covers, when you might need it and how to buy it – Association of British Insurers guide.
Product Safety – Government guide to ensure products are safe and fit for purpose.
Environmental liability insurance: what it covers, when you might need it and how to buy it – Association of British Insurers guide.
Trading online: business insurance – Startups.co.uk on insurance for online businesses.
Insuring your property
Insuring your business equipment, goods and premises – Association of British Insurers on commercial property insurance.
Insurance for home businesses - Startups.co.uk guide to insurance for businesses based in your home.
Insuring against financial risk
Protecting against financial risk – Association of British Insurers guide to insuring against financial risks.
Insurance and liability law advisers
As a small business owner, you may decide to take insurance or liability law advice. There are many different types of people who can give this advice. These include:
- Chartered legal executives
- Business advisers from organisations like banks and business associations
- A qualified financial adviser – Citizens Advice provide information about how to find one here
- Insurers and insurance brokers
For a list of questions to ask a legal services provider before you take legal advice, visit our provider checklist.
Promoting, arranging and providing insurance are regulated activities, which means firms providing these services, or insurance products, must be authorised by the Financial Conduct Authority (FCA). You can check if your provider is authorised using the FCA’s register of authorised providers.
Last reviewed: 24 August 2015