1. Overview

Insurance can protect your business against damage to, or the loss of, physical assets. The cost of insurance depends on both the insurer's assessment of the likelihood of damage and the size of any payment they may have to make in the event of a claim.

This guide provides information on the different types of general and commercial insurances available and how to assess what types of insurance you need.

2. Insuring your business premises

If you have business premises, taking out a suitable insurance policy will ensure you are covered for damage from a variety of causes. While you should check the policy details carefully, most standard contracts will insure your buildings and premises for a range of risks including:

  • fire and lightning
  • explosion
  • riot
  • malicious damage
  • storms
  • floods
  • damage caused by vehicles

If you are a tenant, ask your landlord who is responsible for insuring the premises. Normally this is the landlord. The tenant, however, is usually responsible for shop fronts.

If your lease complies with the Code for Leasing Business Premises in England and Wales, and your landlord insures the property, the insurance should be fair and reasonable, and represent value for money. Your landlord must reveal details of any commission they get and provide the insurance details on request. You can download a copy of the Code for Leasing Business Premises from the Leasing Business Premises website (PDF, 1.31MB).

If you are responsible for insuring the property, you could opt for 'all risk' insurance. These policies do not name the risks covered, instead they list any risks excluded - so all unnamed risks are automatically included. Property insurance policies do not cover:

  • wear and tear
  • electrical or mechanical breakdown
  • any gradual deterioration specified in the policy

You should tell your insurer if your premises are left unoccupied for any length of time. Cover is likely to be reduced to fire only and may not include malicious damage caused by vandalism.

You need to insure your business premises for the full rebuilding cost, known as reinstatement, rather than just the market value. This is because you will only be able to claim the cost of what you have insured - regardless of the amount of damage.

A chartered surveyor will be able to help you to calculate the reinstatement value. You can select a qualified chartered surveyor through the Royal Institution of Chartered Surveyors (RICS) website.

As well as insuring the building itself, you should also consider taking out public liability insurance if members of the public visit your premises.

To decide on the appropriate level of cover, you should seek professional advice from a regulated insurance company or broker. Insurance brokers, advisers and other insurance intermediaries are regulated by the Financial Services Authority (FSA). You can check that your adviser is regulated by the FSA on the FSA website.

If you choose to deal directly with an insurer, it's worthwhile checking that they are a member of the Association of British Insurers (ABI). Check that an insurer is a member of the ABI on the ABI website.

3. Contents insurance

Premises insurance only covers the physical building, so you will also need separate insurance cover for stock, machinery and contents. You have the choice of either replacement as new insurance or indemnity insurance.

Many business owners choose indemnity cover, which deducts the cost of any wear and tear when settling a claim. Contents are also covered against theft, providing there has been forcible and violent entry to, or exit from, the premises.

You can also choose a business interruption policy that insures against loss of profit and higher overheads resulting, for example, from damaged machinery.

To decide on the appropriate level of cover it's a good idea to seek professional advice from a regulated insurance company or broker. Insurance brokers, advisers and other insurance intermediaries are regulated by the Financial Services Authority (FSA) and you should make sure that your adviser has FSA authorisation. Check that an insurance broker is regulated by the FSA on the FSA website.

You can select a broker through the British Insurance Brokers' Association (BIBA) website or contact the enquiry line on Tel 0870 950 1790.

If you buy products or services from insurance intermediaries, you have the right to ask the intermediary how much commission they get for selling the product or service to you.

If you choose to deal directly with an insurer, it's worthwhile checking that they are a member of the Association of British Insurers (ABI). Check that an insurer is a member of the ABI on the ABI website.

4. Specialist insurance

Depending on the type of business you run, it may be wise to take out specialist insurance for your business assets.

There are many types of commercial insurance you may wish to consider:

  • Loss of cash insurance - provides cover to an agreed limit for the loss of money, whether in transit or from business premises.
  • Goods in transit insurance - covers goods against damage while being moved.
  • Travel insurance - essential if you or your employees travel abroad. Ensure that you are covered for working abroad as well as travelling, if necessary.
  • Commercial legal insurance - covers legal expenses that may arise out of a change in legislation or penalties resulting from non-compliance.
  • Credit insurance - insures you against debtors who are unable to pay you as a result of bankruptcy.
  • Engineering insurance - provides specialist cover for machinery, including computers. By law, some types of machinery must be inspected regularly. An insurer will be able to tell you if this applies to your business and will often arrange inspection visits. To insure off-site machinery, you will need to purchase all risks cover.
  • Professional indemnity insurance - covers you against compensation claims if you have been negligent, resulting in damage or loss to a client.
  • Data processing insurance - provides cover for electronic media and electronic data processing equipment.
  • A fidelity guarantee - insures against any loss of money or stock as a result of staff dishonesty, such as theft.
  • Tradesman's tools can often be added to a liability package.

You can select a broker through the British Insurance Brokers' Association (BIBA) website or contact the enquiry line on Tel 0870 950 1790. If you choose to deal directly with an insurer, it's worthwhile checking that they are a member of the Association of British Insurers (ABI). Check that an insurer is a member of the ABI on the ABI website.

5. Motor insurance

By law any vehicle used on the road or other public place must be covered by a motor insurance policy. If you, your employees or anyone else working for your business uses a vehicle for work then you should check that:

  • all vehicles owned by your business are covered by appropriate insurance
  • any employees' vehicles used for or in connection with business have their insurance extended to cover use for their employer's business
  • any personal vehicle insurance that you may have also covers business use

You should also make sure that the cover provided by the policy is appropriate as there are different classes of business use. For example, travelling sales people or commercial representatives are considered differently from those making only occasional business trips, or who carry your products or other business assets.

If you own several vehicles you may be able to get fleet cover that might offer better terms. Your insurance broker will be able to advise you on this.

You need to check the licences of all your drivers and advise your insurers of any motoring convictions, otherwise, you will not be insured. You will also need to tell insurers of any motoring convictions that happen after insurance is in place.

You should consult an insurance broker about which types of insurance best meet your business' needs. You can select a broker through the British Insurance Brokers' Association (BIBA) website or contact the enquiry line on Tel 0870 950 1790. If you choose to deal directly with an insurer, it's worthwhile checking that they are a member of the Association of British Insurers (ABI). Check that an insurer is a member of the ABI on the ABI website.

6. Business insurance if you work from home

If you work from home, you may need a specialist insurance policy. Household insurance will not cover any loss of office equipment, nor will it provide public liability cover.

Your standard household insurance may even be invalid if you work from home, although most household policies can be extended to cover this. Similarly, you should check the terms and conditions of your mortgage, as lenders often need to be informed if you use your home to run a business.

Consult your insurance broker about which policy would best suit your business needs and which will evolve with your business as it develops. You can select a broker through the British Insurance Brokers' Association (BIBA) website or contact the enquiry line on Tel 0870 950 1790. If you choose to deal directly with an insurer, it's worthwhile checking that they are a member of the Association of British Insurers (ABI). Check that an insurer is a member of the ABI on the ABI website.

7. Getting the right insurance cover

Few business owners deal directly with insurers. Most prefer to go through an insurance broker for impartial insurance advice.

They can advise you on whether a single policy or a combination of single policies would be more appropriate. Be sure to give all relevant information to the insurer, otherwise a policy may not be valid.

You can select a broker through the British Insurance Brokers' Association (BIBA) website or contact the enquiry line on Tel 0870 950 1790.

Insurance brokers, advisers and other insurance intermediaries are regulated by the Financial Services Authority (FSA) and you should make sure that your adviser has FSA authorisation. Check that an insurance broker is regulated by the FSA on the FSA website.

If you buy products or services from insurance intermediaries, you have the right to ask the intermediary how much commission they get for selling the product or service to you.

If you do choose to deal directly with an insurer, it's worthwhile checking that they are a member of the Association of British Insurers (ABI). Check that an insurer is a member of the ABI on the ABI website Lloyd's underwriters are not represented by ABI. Search for agents, brokers and coverholders on the Lloyd's website.

When buying insurance, it is useful to:

  • get quotes from several different insurers or ask your broker to do so
  • compare the levels of cover
  • talk to your broker about whether you need a policy tailored to your specific needs

Other factors to take into account when choosing a policy are:

  • what it will cover
  • service
  • cost
  • whether there is a no claims bonus
  • whether the insurer offers 24-hour legal advice and emergency helplines
  • the level of excess - the amount of each claim that you will have to pay yourself
  • the extent of excess to be retained by your business 

8. Making an insurance claim

As soon as you discover loss or damage to your assets, you need to report it to your insurance provider. If you think that the loss or damage is due to a criminal act, you should report it to the police immediately. You should write down as many details as possible about what happened and when.

You will also need to provide your insurers with:

  • estimates for repairs
  • proof of the cost of any emergency repairs that were required, for example to make equipment or premises secure 
  • proof of ownership
  • the cost of the items you are claiming for, with valuations and/or receipts
  • a police crime reference number, if you think that your business has been the victim of a crime
  • the opportunity to inspect any damaged assets if required

If you need to make emergency repairs, do so and advise your insurers of what you have done. If possible, advise insurers before going ahead, but it is most important that you prevent further damage that might increase the claim.

For large or complicated claims, the insurance company will often employ a loss adjuster. They will inspect the damage and check claims for quantity, description and pricing. Loss adjusters are impartial experts who can advise both the insurer and the policyholder.

They can also advise you on:

  • how to improve security and safety
  • areas of cover you may have overlooked
  • repair techniques and specialist companies that can carry out such work

You could employ a loss assessor who will negotiate and settle the claim on your behalf. However, since they will charge a fee, it is usually only worth considering if you are likely to make a substantial claim.

Loss assessor contact information on the Institute of Public Loss Assessors (IPLA) website.

9. Reducing the risk to cut premiums

Insurance can be expensive, but there are ways of reducing your company's risk and, as a result, your insurance premiums. One important way to do this is to ensure that your health and safety record is good.

You can do this by:

  • conducting a safety and risk audit
  • demonstrating a clear health and safety policy with properly documented procedures
  • regularly servicing equipment
  • assessing how well you're managing your health and safety hazards