Business Law basics: Liability Insurance in the United Kingdom

Assured Angel By Assured Angel, 20th Jun 2010 | Follow this author | RSS Feed
Posted in Wikinut>Business>Law

Insurance is not fun and there is no way to make it so. But if you are running a business, it is an essential part of your strategy and operations. Cutting corners means potentially harming yourself and others so here is the low down on business insurance.

Business and Insurance

The last thing that a person thinks about when they are starting a business is insurance and liability. Well they do if that person is me! It is only in the last few months that I have I have acquired the insurance cover that I needed. It was only when I applied to become an approved supplier of business plans that this became an issue. They needed cover of at least £250k of insurance cover - public liability and professional indemnity insurance. Not fun but not as bad as I thought it would be, mostly because a great family friend who was an insurance broker, helped me(thank you Dave M, you know who you are!). One of the things that I found strange was the public liability insurance (which is supposed to protect against injury, damage and loss suffered by third parties when they visit your property) because although by law I have to register an address for my business, all my clients and business is done online via email and video conferencing (Skype etc). Thus having to insure this area was a little strange for me. I was assured it was necessary because people feel assured by this. Anyway, I where was I? Oh yes. Talking about the legalities of business liability insurance. This article will deal with this area, I will try and make it fun I promise.

Why do I need it?

Well if someone's property is damaged or if someone is hurt whilst on your property, you are deemed liable for this and can be sued. If they are successful, then you will have to pay compensation as well as court courts. Having this insurance helps protect you and your business against the huge costs. Fancy paying out £100,000 because someone files a successful lawsuit against you? Thought not. That's why you need it.

So how does it work then?

The cost of the insurance (otherwise referred to as insurance premiums) is what the insurer will charge to insure your business. When making this determination, they will take a few things into consideration including the size of your business and the nature of your business. If you are an small or medium enterprise (SME), then the insurer will calculate an average rate based on what has been paid out to similar businesses. For public or product liability, turnover is used to calculate this. For employer liability insurance, they use payroll.

Are there any insurances that, as a new business I need by law?
Yes. If you employ people, then you will need Employer's Liability Insurance. This covers the costs of legal fees and damages if an employee is injured or becomes ill due to the fault of the employer. Being liquidated or made bankrupt does not stop compensation being demanded if the complainant is successful. The minimum cover required by law is £5 million.

Public Liability Insurance - If you have a premises (or even work from home) and people come to see you, then you will need this. This protects against damage, injury or loss caused by you or your business.

Product Liability Insurance - if you provide goods/products, then you need this. In insurance terms a product is something that is sold or given away. It must be "fit for purpose" and you are legally responsible for any damage/injury it causes. What this insurance does is cover you if you have to pay compensation for the damage/loss/injury caused by your product. It also protects you against unforeseen circumstances but bad workmanship is not covered or excused. The normal level of cover is £2 million.

Property Owner's Liability Insurance - This helps cover costs of compensation if someone is injured following an accident on or linked to your premises. If your business is on your home premises, this may be covered by your home insurance but please check this. If you have a business premises, this may be covered by public liability insurance if you have it.

Professional Indemnity Insurance - if you provide a service or sell your skills then you will need professional indemnity insurance.This protects against damage or loss resulting from your negligence or mistakes in the service you provided.

Does liability insurance include everything?
Not always. That is why you need legal expenses insurance. This helps cover the cost of legal action whether it is initiated by your business or whether it is defending your business. This will help pay for expert witnesses, lawyers as well as court costs and those of your opponent.

Congratulations, you made it to the end so you deserve a treat so here is a video for ya (ok its not about the UK but hey...)...see it wasn't so bad, was it?


Business, Business Law, Business Startup, Businesses, Liability

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author avatar Assured Angel
Talented and experienced freelance writer/ businesswoman with a legal background whose engaging, confident but professional attitude is reflected in her writing.
I have also written extensively (over 100 articles) and continue to do soon many subj...(more)

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