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The importance of Business Insurance

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Have you factored in business insurance into your business plan and costings? It is a vital component of your business and you need to ensure that you have the right level of insurance to stay within the law and to protect your business.

As with most insurance types, business insurance is used to protect the business and the business owner, should unforeseen events happen to the business. The trick is to make sure that your business is covered for those events that are most likely to happen and to never find yourself unprotected, which might lead to the financial collapse of your business.

Business insurance can be purchased to cover virtually every aspect of the business. For example, most business owners have a policy that protects them should they lose their business property. Fire and theft insurance would be two means of doing this. Business owners may also want to protect their inventory and their equipment. As well, they most often want to have some form of protection in case an employee is injured on the job.

The types of business insurance and the levels of coverage are often determined by the type of business itself, but it can also be influenced by lenders who hold portions of the business as security against loans that may have been made to the business in the past. Lenders who have financed expensive machinery or other types of equipment will often want the business owner to have some form of insurance on the machinery. This use of insurance helps to protect the lender as well as the business owner should loss occur to the insured item.

The main types of business insurance include:

  • Public liability insurance – compulsory for businesses with a public premises or those carrying out activities publicly. This covers both injury and damage to property caused to third parties.
  • Employers’ liability insurance – compulsory to all businesses with employees, covering any claims made by employees if they are sick or injured due to their work for you.
  • Professional indemnity insurance – also called professional liability insurance. This is only compulsory for certain professions (e.g., solicitor, accountant, private consultant) but is taken out to cover businesses in the event of claims relating to financial or reputational damage.
  • Building insurance – you may need this form of insurance depending on your type of business and type of premises you work from. It provides similar coverage to home building insurance.
  • Contents insurance – this covers business equipment and movable property. It is not compulsory but is recommended for businesses with a large volume or value of movable assets.

    Business insurance can be a complex subject, with many internal variables that need to be examined before a wise decision can be made. For this reason, anyone considering business insurance should first seek the advice of a reputable broker or agent. This article will detail a few of the many variables that business insurance may contain.

Although business insurance is considered an expense, it is often a tax deductible expense. Anyone who is thinking of starting a new business or buying an existing business should invest the time needed to research the types of insurance they will need. Again, the very best way to do this is to speak with a reputable agent or broker. Once you have a clear idea of exactly what you will need you can then begin to shop for the best prices.


At the very minimum you want to make sure that your personal liability is covered by some form of business insurance. Ignoring this may cost you everything that you have worked for and earned.

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