Mark Thomas is Founder and Director of Compare My Insurance.
The business landscape is full of unexpected risks and as such, it’s important that your company is protected against both day-to-day risk and unforeseen circumstances.
Earlier this year, Aviva’s Risk Insights Report discovered that around half [50%] of UK businesses were likely to be underinsured, exposing them to unnecessary legal costs and liabilities and potential waste of time, money and resources.
Commercial insurance, or business insurance, encompasses several kinds of insurance for all types of commercial firms. Some of these are legally required by law, while others are optional depending on particular business needs, circumstances, and the industry in question.
Regardless of the size of your business, it’s vital to be aware of legal obligations when it comes to insurance, as well as the options available to ensure you get the best possible coverage for where your business is currently at.
Legally mandated insurance
There are certain kinds of commercial insurance that are legally required by law. For example, if you are an employer, you are required to take out employer’s liability insurance, which covers the costs associated with compensating an employee who becomes sick or injured through work.
Similarly, if your business uses vehicles in some commercial-related capacity, you must take out commercial motor insurance.
Some professions are also legally required to have professional indemnity insurance, the need for which is usually dictated by their associated professional body or regulator. Examples include healthcare professionals, engineers, accountants, and surveyors. There are other professions who do not legally require this cover, but it is nonetheless still considered a high priority due to an increased risk of facing certain disputes or liabilities. This is true of professions such as journalism, design, and certain kinds of consultants, such as IT consultants.
Optional insurance
Alongside legally required business insurance, there are many kinds of optional insurance that provides companies with additional safeguarding – though many of these are dependent on the specific needs of a business.
Commercial property insurance is one such example, which covers costs associated with repairing or rebuilding commercial property or replacing stock or equipment in the case of theft or damage.
Liability insurance, though optional, is another priority for many types of business, covering the cost of compensation claims bought against your business by clients, customers, shareholders, investors, or members of the public.
There are many additional kinds of optional insurance, many of which are a response to the changing business and technological landscape. Cyber insurance, for example, covers losses relating to the damage or loss of IT systems and networks – something which is becoming all the more important as businesses continually evolve their digital capabilities.
Tailoring insurance to fit business needs
Many types of commercial insurance are sold as packages, combining several kinds of insurance into one product.
Before delving into which insurance package or product is right for you, it’s important to really get a grasp of where your business is, and what its particular needs are. Every business is unique, and the insurance needs and requirements of a construction company will vary wildly from those of a café or hair salon.
It’s useful to assess certain key factors during this deliberation, such as the size of the business. Companies of different sizes will have various liability concerns, so it’s essential to customise your business insurance in line with this, or risk overpaying for coverage that is not required for a business of your size, or conversely, missing out on certain protections that you do require.
Weighing up the unique aspects of your business that require special or tailored considerations is also important to ensure the needs of your business are being met by your policy. The specific risks associated with the industry you operate within are central to this, as some industries face higher risk than others. Being aware of these ensures you end up with a policy that provides an appropriate level of protection.
The benefits of tailored insurance
A Deloitte report on the future of SME insurance found that many small and medium businesses do have an appetite for new types of risk coverages. Amongst respondents, 22% cited cyber risk protection as a high priority, while 20% were interested in coverage against business interruption. However, these protections were currently lacking in their insurance portfolios, indicating a lack of tailored insurance to suit their business needs.
Though many types of commercial insurance are often bundled together, the benefit of tailoring your policy specifically to you helps to plug the gaps as indicated above, which in turn translates into better protection for you and your business, minimising disruption, and reducing the cost and time impact if the unexpected does happen.
Your level of coverage must also match your actual business risks. Paying for add-ons that provide no tangible protection when applied to your specific circumstances is not helpful. Tailoring your policy guards against overspending, while also ensuring the money you do spend on insurance is providing a tangible benefit.
Final thoughts
While opting for a tailored policy may appear to be an additional commitment of time, it is time truly well spent. All businesses are unique, and an “off-the-shelf” insurance package is unlikely to provide the exact protections your business needs.
Assessing the current circumstances and operational factors of your business ensures you are getting the right support and coverage to fit your business’ needs, while having that all-important protection that could save financial woes further down the line.
