Managing a start-up or fast growing business is like a game of Tetris.  

Time is always moving forward, bringing you a continuous flow of challenges that need to be solved to avoid errors and build a solid foundation from which to level up. To start with, these “blocks” are often centred around the following processes:

• Tax
• Accounting
• Legal
• Cash flow

Beyond these four cornerstones, there’s insurance. Not only is it legally required by the government to allow you to operate but it’s an asset of your business that will protect you from any errors you may have made in the past or present. Insurances are there to protect yourself, your business and your investors from unforeseen eventualities and to stop you from seeing the two words you never want to see… “game over!”

Your insurance policies should be tailored to your business in terms of product cover and exposure. As your business will likely be changing a lot during it’s early development, it’s crucial that they’re reviewed annually to make sure you’re appropriately covered. No business is the same and, by default, everyone’s insurances shouldn’t be the same, however I’ve outlined 6 potential products below that are relevant to most businesses and what the cover includes.

If you have employees, you HAVE to have employers liability insurance (EL). This is the only insurance that is required by law and if you don’t have EL, the Health and Safety Executive (HSE) can fine you £2,500 for every day you go unprotected, which would sting even a successful business. This insurance will cover your business in the event that one of your employees makes a claim that they have suffered an illness or injury as a result of working for you. It covers any legal and compensation costs involved in defending the case. So, this one is a must!

Most businesses will interact with the public in some way shape or form and if yours does, public liability insurance (PL) should be part of your insurance portfolio. It’s one of the most popular policies for small businesses, as it covers you for any claims made against you by members of the public. Accidents are a part of life and, unfortunately, if one of these accidents can be linked back to one of your business activities, you could be held liable. For example, if you or one of your team accidentally causes injury or property damage to a member of the public, your business could have to cough up the legal fees and compensation costs which can run into the millions. It’s also worth noting that your clients and suppliers may request you have PL as a condition of working with them. So, it’s important cover in more ways than one.

If your business involves consulting, offers a professional service or provides any sort of advisory function, you should consider professional indemnity insurance (PI). This product is designed to cover any professional mistake that may occur that has a subsequential impact on your clients. This could be anything from a financial loss, to picking up the tab for any legal or compensation costs. Let’s be honest, we aren’t perfect and however hard we try, mistakes will happen at some point (particularly when a business is finding its feet). As with PL, having PI can make you a far more attractive and credible option to potential clients.

Does your business handle significant data for any of your clients? In 2021, 60,111 UK businesses reported a cybercrime and that’s just the ones who felt comfortable enough to divulge they had been hacked! The drastic increase in cybercrime has increased the importance of cyber insurance. Cyber liability cover is designed to mitigate that risk, by covering businesses for data breaches, cyber-attacks and all the potential other damages that could ensue. In the event that you are targeted, cyber insurance will cover any legal claims, compensation costs, and fines under the GDPR (where legally insurable). In some cases, it can also provide legal, IT, PR and customer service support to help get you back on your feet.

Every business will have an individual or individuals who are vital to the business’ function. If the business were to lose this person(s) and that would cause a significant impact on revenue or business function, key person insurance could be crucial (KPI).  KPI is a life insurance policy that a company purchases on the life of an owner, a top executive, or another individual considered critical to the business. The company is the beneficiary of the policy and pays the policy premiums. KPI offers a financial cushion that essentially buys the company time to find a new person or to implement alternative strategies to save the business.

How is the ownership of your business structured? Do you have any shareholders? If you do, shareholder protection might be something you want to look into. This product is a type of business protection that provides shareholders with the necessary funds to buy shares from each other if one of them were to die or was unable to work due to a serious illness or accident. This gives you control over your business’ destiny rather than potentially welcoming a significant shareholder into the mix who doesn’t have the same vision for your business.

So take a minute, pause the game, and think about your exposures as a business and if you are appropriately covered. Taking one afternoon a year to ensure your insurance policies are up to date will allow you to focus on the pieces that matter. You won’t have to look over your shoulder to check to see if a previous mistake has reared its ugly head… Nothing frees the mind more than not having to worry about the past!

James Watson