BUSINESS INSURANCE GUIDE
What business insurance is legally required?
It's a fair question, and with business insurance the answer is often “not legally, but you may still need it to do the work.”
BUSINESS INSURANCE GUIDE
It's a fair question, and with business insurance the answer is often “not legally, but you may still need it to do the work.”
That's because there are three different types of requirement worth understanding:
The law requires it.Your profession requires it.Your client or contract requires it.
They aren't the same thing.
The main example for most businesses is Employers' Liability Insurance.
If you employ people, you're generally required to have it, although limited exemptions apply. Employers' Liability helps protect against eligible claims where employees become injured or ill because of their work.
For most employers, this isn't simply a commercial decision. It's a legal requirement.
Some professional or regulatory bodies require their members to maintain particular insurance, commonly Professional Indemnity.
That doesn't make PI legally compulsory for every business in the UK. It means holding insurance may be a requirement of practising within a particular profession or maintaining professional membership.
If you belong to a professional body, check its current requirements.
This is probably the requirement many business owners encounter most often.
You're about to sign a new client and halfway through the contract it specifies £2 million Professional Indemnity and £5 million Public Liability.
Those requirements don't necessarily come from legislation, but if you want the contract, you'll need to meet the client's terms.
In the real world, that distinction matters.
Not generally for every UK business, but a client, landlord, venue, local authority or principal contractor may require it.
A tradesperson, for example, might need evidence of a particular level of Public Liability before being allowed onto a site.
Again, PI isn't generally a legal requirement for every business, but professional bodies and clients can require it.
Where people rely on your advice, designs or professional services, it can also provide important protection even when nobody requires you to buy it.
Cyber Insurance isn't generally compulsory either.
Businesses still have legal responsibilities around personal information and data protection, but insurance and compliance aren't the same thing. Good cyber security and appropriate data practices remain important whether or not you have insurance.
Cyber Insurance provides a separate layer of protection for specified cyber incidents.
D&O isn't generally compulsory.
It addresses a different risk: certain claims made personally against directors and other insured individuals arising from management decisions or actions.
Running a limited company doesn't mean every potential claim stays exclusively with the company.
Insurance clauses are easy to skim over when you're focused on winning the work.
Take five minutes to check what insurance the client requires, the limits they've specified, whether your existing policy meets them and how long the cover needs to be maintained.
Finding out before you sign is considerably easier than discovering the requirement afterwards.
