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12 Types of Business Insurance You Might Need
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Business insurance can help protect you and your business financially in case of an unexpected event—from a customer falling whilst on your premises to an employee's workplace injury to theft of your business equipment. But what kinds of cover do you really need, and how much does business insurance cost? It can be confusing trying to understand the dozens on types of cover available in the marketplace.
Here we briefly explain the most common types of cover to give you a lay of the land. While our definitions can help you find the right cover, if you are uncertain how to cover the specific risks faced by your business it's best to contact a specialist broker or business insurer. You can also click through to the landing pages for each type, where we have further information and examples.
Most Common Types of Business Insurance
1. Public Liability Insurance
Public liability insurance is the most common type of business insurance, and it’s a must-have if you have any in-person dealings with members of the public including your customers, clients, suppliers, vendors, etc. Public liability cover protects against claims from third parties for bodily injury or property damage, and covers both your legal defence costs and any compensation payments you're required to make.
While not required by law, a minimum amount may be required by various counter-parties and it’s critical for businesses that interact with the public, from dog walkers and mobile hairdressers to cupcake bakers and builders. Without this type of cover, a company being sued for bodily injury or property damage could be responsible for paying thousands or even millions in legal fees and settlements.
Public liability insurance is typically sold with a limit of £1 million, £2 million, £5 million or £10 million. The cost of public liability insurance starts from around £100 to £150 a year on average, but depends on the coverage limit as well as factors like your profession and even where you live.
- What it covers: Legal defence costs and compensation payments following claims of bodily injury or property damage to a third party.
- Who needs it: Any business that interacts in person with members of the public, including customers and vendors.
Compare Public Liability Insurance
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2. Product Liability Insurance
Product liability insurance protects you against a claim if a customer is injured or falls ill from one of your products. If you make and/or sell a product to customers (whether you sell directly to retail customers or you're just part of the supply chain) you might need this cover—even if you're simply selling used goods on ebay!
Product liability cover can be bought separately, but it is often wrapped up together with public liability insurance.
- What it covers: Legal fees to defend claims of bodily injury or property damage due to a product you sold and compensation payments your company is required to pay if found liable.
- Who needs it: Businesses that are involved in including the design, manufacture, distribution, supply and/or retail of a product.
3. Employers' Liability Insurance
Employers' liability insurance (EL) is a legal requirement if you employ anyone, and covers claims made by employees if they are injured or fall ill because of their work. There are a few exceptions, but in most cases you need EL cover even for temporary or part-time workers. Employers' liability costs start from around £60 for an office worker or over £200 for a trade job.
- What it covers: Legal fees to defend a claim from an employee for a work-related injury or illness and compensation payments to the employee if your company if found to be liable.
- Who needs it: A business that hires any workers or employees (but you may not need it for certain situations such as hiring freelancers or independent contractors).
You can also buy a combined public and employers' liability insurance policy, which covers claims from both third parties and employees in case your business is found liable for injury or damage.
Compare Public and Employers' Liability Insurance here.
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4. Professional Indemnity Insurance
Professional Indemnity (PI) insurance protects you if you give advice or professional services—that is, expertise. PI insurance is used if a client alleges they've lost money because you've delivered negligent advice or services (for example, you've made a mistake or error in your work), and it will cover your legal defence fees as well as any compensation you need to pay (including out-of-court settlements). Some of your clients might contractually require that you hold PI insurance. You might need PI insurance if your profession involves selling a service or advice, for instance:
- Solicitor
- Lawyer
- Healthcare professional
- Accountant
- Surveyor
- Consultant
- Photographer
- Designer
- Architect
- Wedding planner
- What it covers: The cost of your legal defence and compensatory damages related to advice or services you provided.
- Who needs it: A business that is paid for providing professional advice or services.
Compare Professional Indemnity Insurance
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5. Commercial Vehicle Insurance
Commercial vehicle insurance is necessary for company-owned or leased vehicles and can protect against liability and damage to third parties, as well as your own vehicles. As with regular car insurance, there are three levels of cover available in the UK market: Third Party Only (TPO), Third Party, Fire and Theft (TPFT) and Comprehensive.
Companies with more than one vehicle can buy a motor fleet policy that can cover multiple vehicles, even if they are different kinds of vehicles (e.g., motorbikes, cars, vans, lorries, etc.). And you can add on cover for your own tools and equipment as well.
- What it covers: Third party liability and damage, and potentially damage to or theft of your own vehicles (TPO, TPFT and Comprehensive vehicle cover).
- Who needs it: A business with company-owned or leased vehicles or a privately-owned vehicle involved in commercial activities (making deliveries, transporting goods, transporting paid passengers, etc.)
6. Commercial Property Insurance
A business's office, equipment, stock, tools and fixtures can all be covered by commercial property insurance. You can customize your property insurance to offer the specific cover you need, as needs will vary between businesses. For example, if you own your premises you'll need commercial buildings cover, but if you rent your premises then your landlord will cover the building—but you still may have fixtures or fittings, equipment, stock or other items that you want to insure against theft or damage with a commercial contents policy.
- Buildings insurance
- Contents insurance
- Equipment insurance
- Fixtures and fittings insurance (if you lease your premises)
- Tools cover (e.g., plumbers' tools)
- Stock cover
- What it covers: Theft, loss or damage to your commercial property or contents within the property.
- Who needs it: Businesses that have property or possessions which would be expensive to replace or repair.
Compare Commercial Property Insurance
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7. Legal Costs Insurance
Business legal expenses insurance (LEI) gives you access to an expert legal team and pays 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
However, a general legal expenses policy won't cover certain specific situations that are covered by other types of liability insurance—for instance, an injury claim from an employee would only be covered by an employers' liability policy, not a general business legal expenses or legal costs policy.
- What it covers: Legal advice and legal expenses (but not compensation payments).
- Who needs it: Any business could need this, but it's usually designed for SMEs who might not have access to a legal team or funds to defend a claim, justified or not.
8. Goods in Transit Insurance
Goods in transit insurance is critical for businesses involved in transporting anything, as it provides protection against theft, loss and damage to goods whilst they're in transit.
- What it covers: Theft, loss and damage to goods whilst they're in transit.
- Who needs it: A business that is paid to transport goods, such as couriers, delivery companies, hauliers, motor trade, vehicle recovery, etc.
9. IT and Cyber insurance
Cyber insurance covers losses related to hacking, data breaches, viruses and other cyber crimes. This includes direct costs incurred by your business and also claims from third parties that were harmed by an attack on your business.
- What it covers: Losses related to hacking, data breaches, viruses and other cyber crimes.
- Who needs it: Nearly all company's are at risk of cyber crime these days, but cover can be particularly relevant for companies that stores sensitive customer information such as names, addresses, banking information or other personal data or that utilise networked environments.
10. Business Interruption Insurance
Business interruption insurance covers lost income or extra working costs if a disaster leaves you unable to trade normally. Note: business interruption insurance usually only covers physical disasters like a fire or flood; pandemics like COVID-19 are not usually covered.
- What it covers: Reduction in income and possibly working expenses related to a disaster
- Who needs it: Businesses that cannot operate normally if there is damage to their physical premises.
11. 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.
- What it covers: Legal defence costs and compensation for justified claims, but not fines or penalties.
- Who needs it: Cover is needed for members of an executive board and senior managers.
Compare D&O Insurance
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12. Personal Accident Insurance
Personal accident insurance provides financial cover directly to you and/or your employees in case of an accident that results in serious injury or death. This type of cover pays out a benefit to help with lost income while you’re out of work, as a weekly amount or a lump sum payment. Some insurers only cover work-related accidents, but other insurers cover your employees for all types of accidents—even if you're on holiday!
- What it covers: A weekly benefit for temporary incapacitation (e.g., £250 a week) or a lump sum benefit for permanent injury or death (e.g., £40,000) due to an accidental workplace injury.
- Who needs it: Any business with owners or employees who would struggle financially if they were off work due to injury, particularly those in riskier industries (e.g., builders).
FAQs
Most types of business insurance are optional. However employers' liability insurance is required by law, and your clients or work venues may insist you have certain coverages in place such as public liability insurance. And some regulatory bodies or trade organisations might have certain minimum requirements, too, e.g., professional indemnity insurance. Even when business insurance is discretionary, most businesses opt for certain coverages to provide financial protection in case of disaster.
The types of business insurance you need will depend on the specific risks faced by your company and your line of business. Read through the guides above and it may become clear what types of business insurance you need. If you are uncertain you can consult a solicitor or go to a legal centre or a Citizens’ Advice Bureau. You an also read more guidance about employers' liability on the HSE website.
Some small businesses pay as little as £50 a year for insurance, while others pay thousands of pounds a year. Ultimately, the cost of business insurance depends on factors like your profession or industry, the types of cover you need, the coverage limits, your previous claims history, the number of employees you have and even where you are located.