As your business grows and evolves, your commercial insurance needs will also change. To ensure you have the correct cover in place and avoid some common pitfalls, review your insurance at these key moments along your business’ growth path.
1. Starting to sell products or services
Whatever the nature of your business, you will need a level of liability cover as soon as you start selling products and services. Public and Products Liability should be a consideration even if you are a sole trader working from home. This cover will provide you with a level of protection should any compensation claims be brought against you in connection with your business activities.
You may also need professional indemnity insurance. This is mandatory, for example, if you are setting up as an accountant, financial advisor or architect. If in doubt, check with the industry body that represents your profession or ask your insurer for advice.
2. Taking on employees
As your business grows, the time will probably come when you will need to build a team around you. Becoming an employer means you have a duty of care towards your staff, so you will need employers’ liability insurance. It is a legal requirement to have cover of at least £5million and to make your policy document available to your employees, either digitally or by displaying a copy on your premises.
Businesses can sometimes get caught out if they have volunteers or contractors working for them. Generally, as soon as you start instructing anyone to do work, whether you are paying them or not, you will be viewed as having a duty of care towards them in a court of law. It is important to carefully review your insurance policy to check its definition of an employee. For example, will it cover you for volunteers, people on work experience or contractors, as well as employees on your payroll?
3. Moving into commercial premises
While many great businesses have started in garages, around kitchen tables, or even in the local café most entrepreneurs move into commercial premises when their venture takes off. As your business grows, you may move several times and may even end up with a portfolio of commercial properties in different locations.
Whether you are moving into your first commercial premises, relocating or opening a new premises, it is vital to involve your insurer in the process. They can then advise you on what property insurance you will need. A good commercial insurer will also want to understand the suitability of the property for your business and any health and safety considerations for your staff and visitors.
4. Investing in equipment
Depending on the nature of your business, you may invest considerable amounts of capital in specialist equipment as it grows. You will need to alert your insurer to these investments to ensure they are covered in your policy.
This is also an important time to consider taking out Business Interruption Cover. Many commercial insurers offer this as protection against loss of income caused by incidents such as a fire, flood or storm. Our Business Interruption Cover also protects against loss of income as a result of such events which then lead to a delay in a crucial piece of equipment being delivered. Many businesses fail to understand how to calculate loss of income in their Business Interruption Cover and lose out as a result. It is important, therefore, to forecast for growth, by providing projected gross profit in line with your chosen indemnity period.
5. Winning new contracts
The Insurance Act 2015 brought in a number of changes, designed to make insurance fairer and more transparent. One key element for business owners to be aware of is that they need to disclose any changes to material circumstances. This means that if you win a major new contract, you should notify your insurer. A good commercial insurer will ask the right questions to understand how a new contract could change the nature of your business and therefore affect the level of cover you need.
6. Exporting your products
The internet is making it easier than ever before for anyone to operate globally. However, it is important to know that your insurance contract will have geographical limits and, in particular, many will exclude the US and Canada. If you want to expand those limits, so you can export overseas, you will need to notify your insurer. If you fail to do so, you will not be covered for any claims against you in those territories.
7. Inviting the public onto your premises
As you grow your business, you may want to start welcoming people other than your staff onsite. For example, you might host open days when you invite members of the public onto your premises. This is a key time for you to review your liability cover with your insurer.
8. Diversifying and launching a new venture
As an agricultural insurer, we see many examples of diversification. A typical example would be a farmer launching a farm shop, a holiday let or an artisan food business. A common pitfall is failing to update your business description on your insurance policy. If you fail to update this as your business evolves, you could face an insurance claim being rejected in future.
While these are key moments in a business’ growth journey, there are many other occasions when it would be wise to review your insurance policy. The key is to have a commercial insurer who takes the time to understand your business needs, asks the right questions and is open and honest with you about the cover you need and the settlement you can expect if you do need to make a claim.
Ria Locker, Technical Leader for Cornish Mutual