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Guide to commercial insurance products


Check the types of commercial insurance that are available for businesses

including employers' liability, public liability, professional indemnity, commercial property insurance, business interruption, etc.


Types of business or commercial insurance include accident, theft and fire


Types of commercial insurance a business may need:


Commercial property insurance


May also be called: Property, Material Damage, Physical Damage, Fire, All Risks, Assets, Building and Contents, and other similar titles.

¤ Building
Needed if:
  • you own the building you trade from
  • you are a property owner and rent a building out to a tenant
  • you rent a building from a landlord and, under the terms of the lease, you are responsible for arranging insurance.

    ¤ Contents
    May also be called: Machinery (and Plant), Fixtures and Fittings.
    Needed if:
  • you trade from your own (or rented) premises.

    ¤ Stock
    Needed if:
  • you trade from your own (or rented) premises AND
  • you are a retailer, manufacturer, wholesaler or other business that carries its own stock.
    (Special insurances on growing crops, livestock, etc. are available for farmers.)

    ¤ Terrorism
    The standard cover that insurance companies provide for Buildings, Contents and Stock is against either Fire and certain specified additional risks (such as explosion and storm) or "all risks". Most insurance companies exclude terrorism from the standard cover, and then charge you extra to include it.

    You need to seriously consider buying terrorism cover if:
  • you have a mortgage on the building, and your mortgage lender insists you insure the building against terrorism
  • you operate from an area that terrorists are likely to target.

    The safest bet is to buy terrorism cover. Remember that:
  • even if bombs are not detonated, there can be considerable disruption to your business by Police cordons etc.
  • terrorist damage doesn’t just occur in major cities – recent events have shown that many bomb factories are in suburban areas and even in blocks of flats.

    ¤ Specified Property
    May also be called: All Risks, Equipment.
    Needed if:
  • your business owns machinery, plant or other equipment that is used away from your premises (as well as, or instead of, at the premises).
    Typical property that needs to be insured anywhere in the country (or sometimes anywhere in the world) includes laptops, contractors’ plant, photographic equipment and other professional tools and equipment.

    ¤ Money
    Needed if:
  • your business handles money (cash and cheques), either on your premises and/or transporting it (such as to and from the bank).

    ¤ Goods in Transit
    Needed if:
  • you transport stock (or property already purchased by customers that you are delivering) in your own vehicle, or
  • you send stock (or property already purchased by your customers ready for delivery) by post, rail, etc.

    ¤ Cargo
    May also be called: Marine (Cargo).
    Needed if:
  • you transport (or arrange transport for) goods abroad (by sea or air).


    Business Interruption


    May also be called: Income, Earnings, Loss of Profits, Consequential Loss, Business Continuity and other such titles.

    ¤ Full Business Interruption cover
    May be called: Gross Profit, (Gross) Fees, (Gross) Revenue, etc.
    Needed if, as a result of damage to your property:
  • you would lose your net profit (or part of it)
  • despite the damage and the fact you might not be trading, you could still incur certain expenses (such as rates, rent, interest on loans, etc.) and you would no longer have the income to pay for them
  • you would incur additional expenses to help you resume trading as soon as possible.

    ¤ Additional Expenses only (not as part of full Business Interruption)
    May also be called: Increased Cost of Working.
    Needed if:
  • you run an office-based business (or businesses not dependant on a premises, eg. a plumber) and, if your own premises were damaged, you could continue trading from alternative premises without losing any significant revenue; or
  • you are a not-for-profit organisation and, if your premises were damaged, you would need to find alternative accommodation.

    ¤ Rent Receivable
    Needed if:
  • you let property to a tenant, AND
  • under the terms of the lease, the tenant would stop paying you rent if the property was seriously damaged.


    ¤ Employers’ Liability


    Compulsory by law – to cover your legal liability for accidents to employees – if:
  • you employ other people - or control their work eg. people on work experience or sub contractors
  • you are a limited company and you just employ yourself.


    ¤ Public Liability


    May also be called: (General) Liability, Third Party Liability.
    Needed by all trading businesses to cover your legal liability to other people for personal injury or damage to their property:
  • that takes place in the course of your business
  • if you own the building you work from, that arises through your ownership of the building
  • if you rent the building you work from, that arises from your occupation of the building.

    ¤ Property Owner’s Liability
    Needed if:
  • you are a property owner (- even if you do not rent out a building to a tenant)
    to cover your legal liability that may arise out of your ownership of the building.

    ¤ Products Liability
    Needed as an extension to Public Liability:
  • if you sell or supply goods (whether as a retailer, producer, manufacturer, wholesaler, etc.)
  • if you ever sell off equipment of any kind
    to cover your legal liability for personal injury or damage when people use your products.

    If you export to North America, you should regard Products Liability cover as essential, bearing in mind the high level of awards made to claimants by US and Canadian courts. (For this very reason, some insurance companies fight shy of businesses that export to North America, so it’s vital to shop around for the right insurer.)

    You don’t need the Products Liability extension if you only supply food and drink that’s consumed on your premises, as basic Public Liability cover includes this.

    However, you do need Products Liability insurance if you sell off second hand equipment from your business.



    ¤ Professional Indemnity


    Needed if:
  • you run a business offering a professional service
    to cover legal liability arising out of professional negligence eg. solicitors or quantity surveyors.


    ¤ Motor


    Compulsory by law if your business has its own motor vehicle(s). Depending on the type of vehicle, you may need:
  • private car insurance
  • commercial vehicle insurance (goods carrying vehicles, passenger carrying vehicles, agricultural vehicles, etc,)
  • motor bike insurance.

    ¤ Motor Fleet
    If you own more than a certain number of vehicles (typically 6), it may be advantageous to insure them on a fleet basis. A single policy is issued, and the premium more closely reflects the number and size of any claims you have made in the past.


    ¤ Engineering insurance and inspections


    Insurance
    Needed if you own or are responsible for machinery and plant (such as boilers, lifts and electrical plant) that:
  • may break down
  • would cause significant damage to surrounding property if it exploded
  • would leave you legally liable if as a result other people were injured or their property was damaged.

    Inspections
    Compulsory by law if you own or are responsible for plant that requires regular statutory inspections.


    ¤ Crime insurance


    (May also be called: Fidelity (Guarantee).
    This insures against stealing by your own employees and/or computer fraud. (Theft by other people is included in Property insurance.)
    Needed if:
  • the effects of this type of crime would be disastrous to your business
  • key employees are entrusted with large sums of money.


    ¤ Medical Insurance


    When running a smaller business success often depends greatly on teamwork. It can therefore pay to ensure that the business owner and employees are all performing at their peak. Medical insurance helps manage partner, director or employee absence due to ill health.
    Medical insurance normally provides:
  • prompt access to diagnosis of health problems
  • prompt access to non-emergency treatment
  • reduced waiting times, helping to get people back to work quickly
  • admission at a convenient time around work and family commitments
  • a choice of consultant or hospital.
    It can also be perceived as a highly valued employee benefit, proving useful for employee retention and recruitment.


    ¤ Accident


    May also be called: Personal Accident, Accident and Sickness.
    This provides compensation if you and/or your employees (through accident or illness) die or become permanently or temporarily disabled.
    Needed if either:
  • you want to offer an additional benefit to your employees, or
  • the business would retain for itself any insurance claim and use it – for example to recruit a replacement member of staff or provide compensation for loss of business.


    ¤ Contractors’ All Risks


    May also be called: Contract Works, Project insurance.
    Cover for buildings or other structures while they are being constructed is needed if:
  • you are responsible under the terms of the contract for arranging insurance on the contract works.

    Most usually this is the responsibility of the contractor. But if you have employed the contractors, it is important to make sure they have arranged all the insurances that they are responsible for under the contract.


    ¤ Partnership Insurance


    The purpose of Partnership Insurance is to provide funds, on death or serious illness of any business partner, to his/her share holding thus ensuring:-
  • ontinuity and prosperity of the business in the event of death or serious illness of a business partner.
  • Security for all the Business Partners.
  • Protection for dependants of all the Business Partners.
    In addition to Partnership Insurance it may be worth considering a ‘buy-sell agreement’ to ensure money is available to buy a deceased partner’s share of the business.
    This type of agreement provides for the sale of a business interest if something happens to a business owner or business partner (e.g. death, disability, retirement ). A buy-sell agreement helps ensure a smooth transition of the business, thus satisfying the needs of employees, creditors, and surviving partners or shareholders and the survivors of the deceased.




    Guide to how.commercial insurance is packaged



    Package policies


    Most insurance companies produce packages of insurance aimed at small companies within certain business sectors. These are sold under different brand names, depending on the insurance company. All are single policies offering a standard range of covers, usually with the option to add on further types of insurance if required.

    The main business sectors for which package policies are designed are:
  • shops
  • offices
  • surgeries
  • hotels, guest houses and public houses
  • “tradesmen” – such as plumbers, decorators and small builders.
    In each case, the policy is designed for small businesses, although how big you become before you're no longer eligible varies between insurance companies.


    Package policies – what’s in it for me?



    There are significant advantages in package policies for those companies that are eligible for them.
    • The standard range of cover on offer has been selected on the basis of what most businesses in that sector will need – so a lot of choices have already been made for you.
    • Because the cover is standardised, there are fewer questions for you to answer when you take out a new policy.
    • By issuing standardised policies, insurance companies save on their administrative expenses. Some of this saving is usually passed on to their customers – so buying insurance under a package policy should be cheaper than buying the same cover under another type of policy.


    On the other hand, insurance companies make certain assumptions about the “average” company in each business sector when they decide on the range of covers on offer and the price you will pay. The disadvantage of package policies therefore is that, if your business differs from the norm, you may find the cover is inadequate or the premium is too high.


    Combined policies


    These also provide various types of insurance under a single policy. And most are also given brand names by insurance companies. But unlike package policies, they are not built round a standard block of covers – so for the most part you choose which covers you want and which you don’t.

    Combined policies are suitable for:
  • medium-size businesses
  • small businesses that fall outside the package business sectors.

    Some insurance companies may produce variations of the combined policy for different trades and industries, though you are still able to choose which covers you want. Most insurance companies issue special policies for garage proprietors that include motor insurance on the vehicles the garage is responsible for.


    Combined policies – what’s in it for me?



    The advantage of the combined policy is that
    • it’s a single policy, with just one premium to pay, and at the same time
    • it’s a bespoke policy that can be tailored to your particular requirements.

    But the downside is that, when you take out a new policy, you may be asked a lot of questions and have to make various choices.


    Single-cover policies


    Finally, you can buy a policy that consists of just one type of insurance. For small and medium-size businesses, these are mainly used for relatively obscure types of insurance
  • that many businesses would not need, or
  • that are provided by specialist insurance companies.
    Probably the most common example is Professional Indemnity insurance.



    Find out more about . . .



    in-depth info which types of commercial insurance your business needs



    in-depth info how much cover you need - guide to sums insured. limits and excesses



    in-depth info the typical minimum premiums that insurers charge.


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