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- 300,000+ quotes completed per month
- Fill out only one form
In this guide we explain the ins and outs of limited company insurance in the UK, including examples so you can see how the different types of cover work and decide which is best for you. The right business insurance not only provides financial protection, it also helps keep your business up and running again if you do face a disaster.
Table of Contents
- What are popular types of limited company insurance?
- Which types do I need?
- Limited company insurance costs
- Where can I get insurance quotes for a limited company?
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What are Popular Types of Limited Company Insurance?
While each company is unique, there are a few main types of business insurance consistently popular with limited companies in the UK. Below we explain what each one generally covers, and provide some real-life examples to help you decide what types of cover you need given your individual circumstances. If you still have questions, fill out a quote form and you can get a call back from a panel member to discuss.
Public Liability Insurance for Limited Liability Companies
Public liability insurance may be critical if you, your employees or your business deals in-person with members of the public, such as customers, clients, a landlord or other people. Why? If a third party is accidentally injured or their property damaged because of your limited company, your company could face an accidental injury or damage lawsuit.
Even if your business is not to blame, public liability insurance can provide valuable resources such as access to a legal team to support your defense. PL insurance covers both legal expenses to defend your business and compensation claims if it's found liable. How much public liability insurance do you need for a limited company? It depends on the risk faced by your company, the size of your company, etc., but for reference, public liability insurance is commonly sold with £1 million, £2 million, £5 million and £10 million of cover in the UK. Get quotes here.
- Bodily Injury: You own a cafe that has a self-serve water station where customers can help themselves to glasses and pitchers of water. After some children spilled water on the floor, a elderly customer slipped on the wet floor and injured their back. They decided to sue your cafe for damages.
- Property Damage: A fire in your restaurant's kitchen damages the business next door. They sue you for damages.
- Property Damage: You have a plumbing business that performs residential work. An employee accidentally knocks a valuable painting off the wall when bringing equipment into a client's property, damaging it.
It’s important to note that public liability insurance is third-party insurance, which means it covers you against claims by third parties, such as customers, vendors, or landlords. Claims by your employees are not covered under public liability insurance.
Product Liability Insurance
Product liability insurance protects against claims that your business's goods or products have caused bodily injury or property damage. If you design, make and/or sell a product, or if you fix things, you might need this cover. In addition to product designers and manufacturers, tradespeople like builders, plumbers and electricians should consider product liability insurance, plus those selling on ebay, Etsy, Amazon, etc.
- You started a natural dog treat company. Contamination in the manufacturing process is causing dogs to become sick. A pet store chain you sell your product to gets multiple complaints from their customers and bad press, and sues you.
- A plastic child's toy designed by your toy company has small holes that can catch a child's finger, causing it to become trapped.
Professional Indemnity Insurance
Professional Indemnity (PI) insurance protects your limited company if you sell expertise, which could be in the form of advice or professional services. PI insurance covers claims by clients who allege that they suffered a financial loss due to negligent advice or service given by your company (for example, a mistake or error in work); it will cover your legal defence fees as well as compensation your business is required to pay.
Depending on the work you do, some clients might contractually require that your limited company hold PI insurance. Limited companies that might need PI insurance include, but are not limited to:
- Web developer
- Wedding planner
- An architect working on a residential construction project makes a mistake with some measurements, and as a result a loft conversion is deemed not fit for purpose. The client has to pay extra money to the builders to make the situation right and the architect is sued for the client's financial loss.
- A property management company manages and maintains a commercial property for the building owner. A leak in the roof is not attended to, causing unnecessary damage inside the building. The building owner sues the property management company for negligence.
- A web development company creates a custom site for a client. After delivery, it becomes apparent there are critical errors in the site, which results in the client's customers losing faith and a subsequent financial loss. The client sues the web development company for work errors and negligence.
Note: Limited companies in the salon business (e.g., hair, beauty, barber, etc.) need a product similar to professional liability insurance called "treatment cover", which covers injuries to customers or clients that occur during or due to your company's work.
Employers' Liability Insurance
If your limited company employs anyone, it will need employers' liability insurance (EL)—this type of insurance is required by law even for casual or temporary workers. There are just a few exceptions when you don't need EL cover.
EL insurance can be expensive compared to other types of business insurance but it protects against compensation claims by current or former employees if they fall ill or are injured because of their work for you. It covers both legal fees in defending yourself from a claim and any compensation you're required to pay.
- An employee injured their back at work whilst moving heavy boxes. They blame you for faulty training and sue you for damages.
Directors and Officers Insurance
Directors and Officers insurance protects the individual directors and officers of a company from claims from shareholders, investors, employees, regulators or other third parties regarding their role. If an individual's decisions or actions prove to be a breach of duty then they may be held directly responsible—D&O insurance is meant to cover their resulting losses. If a company has indemnified their directors and officers than a D&O policy would compensate the company, not the individual.
- The company directors are sued for hiring and failing to supervise an individual who was negligent.
Commercial Property Insurance
Whether your business owns its premises or you rent and simply need contents insurance, commercial property insurance is critical for protecting against perils like fire, flood and theft. Contents cover can protect against damage, loss or theft of valuable equipment, furniture & furnishings, computers and other business items that can be expensive to replace. Whether you rent your premises or own them, contents cover can be a critical component of insurance. And commercial buildings insurance protects the structure and, while not required by law, is a good idea for any property owner.
Having property cover not only provides financial protection for the value of your property, it also helps get you working again if you do face a disaster.
Those holding valuable stock can pay an extra premium for stock insurance, which is typically offered as an extra, add-on insurance coverage. Stock cover provides financial protection if your stock is lost, stolen or damaged. As with everything there are exclusions, for instance frozen food isn't usually covered (but sometimes you can pay extra for this if you need it), nor is general deterioration of stock.
- Contents and Stock Insurance: Your premises are broken into, and your business equipment and valuable stock are stolen.
- Buildings Insurance: Your business owns a warehouse that houses your stock. A fire sweeps through the structure, requiring extensive repairs before it's safe to occupy again.
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Legal Expenses and Tax Investigation Insurance
Business legal expenses insurance (LEI) covers situations that your limited company can face such as tax enquiries, debt recovery and contract disputes, providing access to an expert legal team and paying your legal defence costs in certain situations up to the policy limit for situations such as:
- Employment disputes
- HMRC tax enquiries
- Failed health & safety inspections
- Contract disputes
- Debt recovery
- Property protection
- Identity theft
- and more
- You have a dispute with a client that ends in them not paying you for your work. You need legal assistance to pursue a claim against them.
IT and Cyber insurance
If your limited company processes payment card information or stores sensitive customer information such as names, addresses, banking information then consider buying IT and cyber insurance. Cyber insurance covers financial losses due to hacks, data breaches, viruses and other cyber crimes. Policies should cover direct costs incurred by your business and also claims from third parties that were affected by an attack on your business systems.
- An employee opens an email attachment that contains a virus, allowing hackers to gain access to sensitive customer information and business files. Cyber insurance pays for experts to deal with the situation, including paying a ransom, credit score monitoring for affected customers, etc.
Other Types of limited company insurance
Limited companies might also want to consider other types of business insurance. For example, business interruption cover in case your business premises are physically damaged in a fire, flood or storm leaving you unable to work (but business interruption insurance doesn't usually cover lost revenues due to situations such as the coronavirus lockdown).
Is Insurance Required for a Limited Company?
A limited company might be required to buy certain insurances. For example, if your company is regulated by or a member of certain trade bodies then certain insurance coverage might be required. In addition, any limited company with employees is required to hold employers' liability insurance.
Even if you're not required to hold insurance, limited companies typically consider buying coverage. Without the right insurance in place, your company can find itself in a tricky situation such as a lawsuit or facing another type of financial loss that could have been mitigated by the right insurance coverage.
Even if a liability claim is unfounded and you've done nothing wrong you still to pay for legal advice to defend your company, which can cost many thousands of pounds. Insurance not only helps pay for this, it usually helps you get in touch with experts who can help. And liability insurance can also pay any compensation you're required to pay if found liable; these can reach into the tens or hundreds of thousands of pounds or even more.
When you need public liability insurance: One of the most common types of limited company liability insurance is public liability insurance, which protects against claims of injury or damage made by third parties. Public liability insurance is usually needed if your business has in-person exposure to clients or other members of the public, including vendors or your landlord, for instance—or their property.
When you need professional indemnity insurance: If your business (e.g., you or your employees) gives advice or offers a professional service (e.g., designer, architect, solicitor, etc.) then professional indemnity insurance can protect against claims made by clients that they've suffered a financial loss because your company hasn't done its job properly. Business in the fields of accountancy, architecture, engineering, surveying, law, financial advising and insurance broking are required by regulatory or professional bodies to hold professional indemnity insurance.
When you need employers' liability insurance: If you hire any employees, your business is required by law to hold employers' liability insurance in most cases, even if they're temporary or short term.
When you need D&O insurance: Limited companies by their nature have directors, so D&O insurance is a must-have for most businesses with this structure—it protects the personal assets of a company's directors and officers, as they can be held directly liable for the business decisions they make.
How Much is Insurance for a Limited Company?
The average cost of public liability insurance for a limited company is around £77 a year if your company has 1 director, and around 2.5X as much if you have 2 directors. The cost will depend on factors such as the type of work you do. Less-risky professions like cleaners, dog walkers, photographers, teachers, tutors, caterers, DJs, and more will cost less to insure, while businesses like gardening and building companies can present a higher risk to insurers. This is not a surprise because these types of businesses are more like to expose third parties to riskier equipment and situations.
|Average Cost of £2m Public Liability Insurance||Limited Company (1 director)||Limited Company (2 directors)|
If you give advice or a service you might need professional indemnity insurance, which starts from around £80 a year. If you need to declare 'business use' on your car, expect your premiums to go up as well. Add-ons will increase your insurance costs.
Where can I get Limited Company insurance quotes?
Compare Public Liability insurance quotes here—fill out a short form and quickly receive quotes from 5 providers, and easily speak to someone if you still have any more questions. Then, simply choose the package that works best for you at an affordable price to keep your business safe.
If you hire any employees, even temporary or part-time workers, you'll need employers' liability insurance. It's required by law in most cases.
If you have any in-person interactions with third parties such as clients, customers, vendors, your landlord, etc. or their property then you'd want public liability insurance to protect against third party claims of accidental injury or damage.
If your business activities include giving advice or selling professional services, then yes you should have professional indemnity insurance.
A limited company may be able to trade without insurance, so long as it has no employees and is not bound by insurance requirements by a trade or professional body—but that doesn't mean it should. Small business insurance can cost less than you'd expect and can protect against a wide range of risks.