Commercial Insurance Guide
Introduction Employers’ Liability Professional Indemnity Motor Insurance Public Liability Product Liability Insurance Directors' Liability Buildings Insurance Building Conten Business Interruption Key Man Cover Summary| Introduction | Top |
Anybody starting a business needs to spend some time thinking about what insurance cover is required. No doubt after seeing all their hard earned cash disappearing with each expense, the idea of spending a lot of money on insurance premiums may not be very appealing, but have no doubt, commercial insurance is very important and can be the difference between a ‘setback’ and a ‘disaster’.
There are certain types of commercial insurance which, depending on the type of business the company conducts, is mandatory.
| Employers’ Liability | Top |
If a business employs even only one employee, it is required by law that the company takes out Employers’ Liability Insurance (ELI). The company is responsible for the health and safety for each and everyone of its employees, whilst they are working for the company, on the company’s premises, or have fallen ill due to employer’s negligence.
Employees may claim compensation against the company for any personal injury or illness suffered whilst working for the company, and to safeguard against this, a company takes out Employers’ Liability Insurance (ELI) which covers the company for both claims and associated legal fees.
The prescribed minimum amount of cover required (2001) is 10 million GBP which covers against injury, illness, and disease when suffered working for the company.
However the amount of cover will depend on the amount of risk the employee is exposed to. The more hazardous the environment, the greater the amount of cover.
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Professional Indemnity |
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Professional Indemnity Insurance is taken out by professionals who provide services and advice on a variety of subjects. Those professionals who work in the legal or financial industry are required by law to have Professional Indemnity Insurance . Other professionals such as consultants, engineers etc may also elect to take out Professional Indemnity Insurance. In both instances, Professional Indemnity Insurance covers the business in respect of any claim for incorrect advice, mistakes etc given by the professional, and the policy is constructed to cover professionals against claims made by clients who believe they have been given bad advice or received bad service.
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Motor Insurance |
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On average, the cost for travel insurance cover when abroad is around 25.00 GBP per person per week. However, many of us only think about travel insurance when we are actually booking the holiday at the travel agents and then take the easy way out by letting the travel agent arrange the travel insurance for us as well. This is not the way to do it!
By organizing your own travel insurance, you could save over 50% of the premium and get a better form of cover to boot. For those of you thinking of an adventure or activity holiday, doing your own research when looking for specific travel insurance cover will also save you money. Just because one travel insurance company is more expensive than another, does not mean that the more expensive travel insurance policy will be better.
Always make sure that you know exactly what is being offered and what your travel insurance covers you for.
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Public Liability |
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If a company’s main business activity is dealing with the public either on their premises or the company’s, Public Liability Insurance should be seriously considered. The maximum amount an insurance company will pay out is 5 million GBP, but extra cover can be provided for if circumstances apply.
Typical companies that may require Public Liability Insurance include traders such as window cleaners, builders, gardeners, double glaziers etc. If fact all forms of businesses that carry out their profession on their customer’s premises.
Alternatively Public Liability Insurance may be required by companies whose customers come to them. These include restaurants and cafés, shops and supermarkets, showrooms, fairgrounds and amusement parks, and companies that provide travel services.
In many instances, companies are required by law to have public liability and they display their policy in a prominent place, showing that they are covered by Public Liability Insurance to reassure their customers.
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Product Liability Insurance |
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If the company manufactures or supplies goods then it may be prudent for the company to consider Product Liability Insurance. To some extent it depends on what the goods are, and what potential there is for damage or injury to a third party arising from a defective or a faulty product.
Under the Consumer Protection Act 1987, products must be “fit for purpose” and you will be held legally responsible for any damage or injury caused by your product.
Whilst in most cases the manufacturer is responsible for the product, the supplier may also be liable for faulty goods if the supplier cannot identify the manufacturer, the goods were imported from outside the EU, it bears the suppliers brand name.
The amount of cover needed will depend on what type of goods are being manufactured or supplied, and to what extent if any, the user is exposed to risk of injury.
Typical amounts vary from 1 million GBP to 5 million GBP
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Directors' Liability |
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Directors of a limited company can be held personally responsible for their actions and their personal assets are at risk from any claim made by the general public, the company, its shareholders and/or creditors.
To protect themselves against such claims, Directors can take out Directors' Liability Insurance which covers both the assets of the company and the personal assets of the individual. Typical claims made against Directors include Fraud, Negligence, Unfair practices, and Incorrect Accounting.
It should be noted that if the Director acted deliberately in any wrong doing, then the Directors' Liability Insurance may not be valid.
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Buildings Insurance |
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Depending on whether the company owns the building or is renting it from a landlord, will dictate what course of action is required. If the company owns the building, then it is the company’s responsibility to insure it, whereas if the company is renting the building then it is usually the landlord’s responsibility to insure it and the cost is included in the rent. Be aware however that this should not be assumed and always check it out to avoid any costly misunderstandings!
When arranging insurance for a building, provision should be made to cover the cost of rebuilding it to a similar state . This may require the services of an expert to calculate the exact cost to rebuild the premises, as the cost may be higher than the building’s market value.
The insurance policy should provide cover against various risks including fire, storm, flood, explosion etc. Additional cover can be provided for at an extra cost and an ‘All risks” policy can also be arranged, again at an extra cost.
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Building Conten |
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Depending on whether the company owns the building or is renting it from a landlord, will dictate what course of action is required. If the company owns the building, then it is the company’s responsibility to insure it, whereas if the company is renting the building then it is usually the landlord’s responsibility to insure it and the cost is included in the rent. Be aware however that this should not be assumed and always check it out to avoid any costly misunderstandings!
When arranging insurance for a building, provision should be made to cover the cost of rebuilding it to a similar state . This may require the services of an expert to calculate the exact cost to rebuild the premises, as the cost may be higher than the building’s market value.
The insurance policy should provide cover against various risks including fire, storm, flood, explosion etc. Additional cover can be provided for at an extra cost and an ‘All risks” policy can also be arranged, again at an extra cost.
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Business Interruption |
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Whenever a situation arises when a company cannot operate due to a problem caused by the weather, fire, damage etc. Business interruption insurance will cover the company against the costs incurred during the time the company cannot operate.
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Key Man Cover |
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If a company has any employees that are vital in the operation, then key man cover may be the answer. Whilst the cover cannot replace the individual if he/she is ill or even incapacitated, it can compensate the company for the loss of earnings that relates directly to the employee.
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Summary |
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Commercial Insurance in one form or another is a must for any company, some commercial insurance is compulsory, some vital and some optional. Anybody thinking of starting a company must consider all possibilities before arranging commercial insurance. All aspects regarding the operation of the company should be taken into account.
How many people will the company employ?
What services does the company offer?
What equipment does the company have?
Does the company need transport?
Where will the company trade?
What are the premises worth?
What are in the premises?
What happens if the company cannot operate?
Who are the key personnel?
One final thought, if it might go wrong it probably will!
Good Luck
