If you own a small business, then you will almost certainly know that, if you employ a workforce or operate vehicles within your business, you need to carry employer’s liability insurance and motor vehicle insurance. Beyond this, there is no legal requirement to have any other form of business insurance. However, there are very few small businesses that could survive even a relatively small uninsured loss, and so most carry at least some form of minimal additional cheap business insurance.
For most small businesses the biggest risk is that of damage to, or the loss of, business buildings, equipment and stock, and so most often, when insurance cover is purchased, it is property insurance. What many small business owners are not aware of, however, is property insurance may need to cover up to eight separate risks to your business.
1. Buildings. Business buildings should be covered for a wide range of damage caused by everything from fire and lightning, to floods and earthquakes. In all cases you should insure for the cost of rebuilding, in the event of total loss, and your policy should cover all of the associated rebuilding costs, including such things as clearing the site before rebuilding work can start.
If you lease your business premises, then you should make sure that the owner carries the necessary insurance because, although the buildings are his responsibility, it is your business that will be affected if damage occurs.
If you run your business out of your own home, then check that your home insurance policy covers your business use of the property.
2. Contents. Many small businesses have both equipment and stock that need to be insured against theft and damage. In the case of stock, this will normally be insured simply at its cost price, and you should be careful to ensure that your policy covers such things as seasonal variations in stock levels. Business equipment can either be insured on an indemnity basis, with allowance being made for such things as wear and tear, or your policy can be arranged to provide you with new replacement equipment in all cases of loss or damage.
3. Business Interruption. Loss of, or damage to, your business premises, or equipment, can result in an interruption to normal trading, with a subsequent drop in both income and profit. It can also result in additional expenditure, where it is necessary to outsource some tasks to ensure that you can keep hold of your customers.
Most small businesses fail to adequately insure against business interruption, and it is worth noting that 8 out of 10 businesses that suffer major loss or damage, without adequate insurance, fail within a period of 18 months.
4. Terrorism. While it will not apply to all businesses, if you are operating in an area that makes you susceptible to terrorist attack, then additional cover can be added to your buildings and contents insurance for all terrorist risks, including the risks from nuclear, biological, chemical and radiological contamination. It should be noted that this cover does not normally extend to computer viruses, whether damage occurs deliberately or as the result of a hoax.
5. Engineering. If your business is classed as being within the engineering sector, you can arrange for machinery to be insured, for repair or reinstatement, as a separate part of your policy. This is to ensure that you do not fall foul of your insurer, as a result of arguments concerning the state of repair of damaged equipment that is required by law to undergo regular inspection.
6. Goods in Transit. Cover should be added to your policy if you regularly ship goods, either in your own vehicles, or using a carrier. Special cover should also be arranged if you are moving cash.
7. Glass. If your business premises have an unusually large amount of glass in their construction, either internally or externally, it may be to your advantage to consider adding specific cover for this to your policy.
8. Frozen Food. Should your business involve the storage or transportation of frozen food, then you can insure against the cost of replacing food items, following the breakdown of a refrigeration unit or, in certain cases, the failure of the public electricity supply.
Property of one sort or other forms an important part of most businesses, and the financial loss to the business in the event of the loss of, or damage to, such things as buildings, equipment and stock can be devastating. Small business insurance does not have to cost an arm and a leg and, even a simple and cheap business insurance policy can make the difference between your business surviving or going under when misfortune hits.
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