What is business insurance?

Business insurance helps protect you and your business against unfortunate events. If something goes wrong, it can mean the difference between staying in business or not.

We can’t always prevent bad things from happening, but we can buffer any potential damage. If a customer or an employee makes a claim against you, business insurance can offer protection.

Business insurance can cover all kinds of things including an accident in the workplace, liability claims, theft, fire, legal fees, loss of documents or business interruption.

Here, we look at the different types of business insurance and why you might need it.

Why do I need business insurance?

Some kinds of business insurance are a legal obligation, like employers’ liability, while others are optional but can help provide you with peace of mind. Insurance can also give your customers and clients the reassurance they may need to do business with you.

As a minimum, many businesses will also need public liability insurance and professional indemnity insurance. Areas like key people insurance can also be a stipulation set by investors, depending on your business.

Compulsory business insurance

In the UK, employers’ liability insurance is compulsory if you have employees, subcontractors or anybody doing work experience. This will cover you against any claims in the event of disease, injury, illness or death of any of your staff, in the course of their work.

Optional business insurance - depending on your business

Other types of business insurance are optional but could be wise. You should make your own decision based on the risk, probability and likely cost compared to the regular premiums and any excess amount not covered by the business insurance.

For instance, you may sell high value goods, so theft could be a big risk for you and potentially very costly. If you were offering services to the public within your home, for example lessons in maths, then liability insurance to protect against accidents could be a good idea.

With many businesses working away from their regular premises, it’s good to check whether your standard business insurance covers your equipment for damages at home or elsewhere. Laptops or mobiles can often be covered by ’Electronics and Portable Equipment cover’ which can be an optional add on - for example with cover up to £5000 for a small business.

Have a good think about your own specific business and the risks it involves - every business is different. If you’re a purely online business, you could think about cyber insurance to protect against hackers. If you’ve had issues with getting paid due to clients going out of business, how about invoice insurance?

You can find a range of companies offering business insurance in the Starling Marketplace, the in-app space where customers can connect to third-party products and services. These include Superscript, offering comprehensive business insurance tailored to your needs and Nimbla, focused on reducing trading risks through invoice insurance

Business insurance and tax

For taxation purposes, business insurance is considered as an ’allowable expense’, because it’s an essential cost that keeps your business running. When you’re calculating taxable profits for your tax return, you can deduct business expenses from your income.

Types of business insurance

Here are some examples of business insurance types you should be aware of.

How to choose business insurance

Some companies offer better deals than others for small business insurance, so it’s important to do your research. Remember that cheaper doesn’t always mean better. If you don’t have the time for research, or don’t feel confident making the decision, then a reputable insurance broker could be an idea.

When you choose business insurance, always think about the specific needs of your business and the risks it faces.

To compare your options outside of the Starling Marketplace, head over to Simply Business, a comparison tool for business insurance that includes an easy way to sign up once you've chosen your cover.

Watch out for business insurance scams

Choose a reputable company and shop around. If an insurance deal seems too good to be true, it probably is. Read what the review sites say - not only the reviews on the insurance company’s own website.

It may seem a little boring, but before you sign up to any insurance policy, make sure you have a good read of the small print. It’s really important. Look at the terms and conditions to see exactly what’s included or excluded. Cheaper policies usually only include the basics, so make sure you’ve covered everything that you need.

You could also try finding insurance through a reputable insurance broker. The British Insurance Brokers Association (BIBA) have a useful tool that can help.