Lack of liability insurance for small business can be fatal

Make no mistake; liability insurance for small business is an essential part of your Insurance portfolio.

A large number of SME type businesses do not understand their exposure to liability and are often not adequately insured and protected.

So, why do you need to arrange liability insurance for small business? Well, I often hear “I am very careful; I will not do anything that will cause a claim.” The important thing here to remember is not whether you have done something wrong but whether somebody else THINKS you have done something wrong and holds you responsible! The cost of defending a claim is paid by the Insurer regardless of eventual Liability being proved and defence costs alone can easily run into tens of thousands of pounds. As a sole trader or a partnership, failure to arrange liability insurance for small business can prove devastating as all that you own and have worked for is at risk if you are sued and found legal liable for injury or damage and you are not adequately insured.

So what are the options when it comes to considering liability insurance for small business?

If you employ anybody or use the services of somebody who is self employed (Labour only sub-contractor) for their labour services only, then there is a legal requirement for you to hold Employers Liability Insurance. This style of liability insurance for small business protects the business from claims from any person defined as an employee from claims made against them by the employee for injury sustained as a result of that employment.

Although not a legal necessity with regard to liability insurance for small business, a major exposure for the business relates to claims brought against the business in respect of injury or damage to other parties (other than employees) or their property. This can be dealt with by arranging Public Liability Insurance. It is our recommendation that cover be arranged with a minimum Limit of Indemnity of £2,000,000; however, when considering the limit of indemnity care should be taken to ensure that the limit of indemnity chosen reflects the degree of total exposure in the event of a claim.

If your business supplies a product, either as a retailer, wholesaler or manufacturer, there is a definite need for products liability insurance for small business. This cover protects you for claims made by other parties for injury or damage resulting form products sold, supplied, serviced or repaired. This can usually be arranged by extension of the Public Liability Insurance mentioned above and again we recommend a careful consideration be given to an adequate Limit of Indemnity.

If your business is like many emerging businesses and provides design, advice or consultancy services, then the liability insurance for small business required is Professional Indemnity Insurance. This type of Insurance protects the business in respect of claim made by another party relating to losses resulting from your professional advices and services. Again, care should be taken to ensure that the limit of indemnity reflects your exposure to risk.

If your business operates as a Limited Company, many people believe that as Directors they are personally secure as all claims for injury or damage will be made against the limited company, providing a higher degree of security than if the business was run by a sole proprietor or partnership. However, there is already a trend to pursue claims against individual Directors, where the protection of the Company Policy would not apply and we therefore recommend Directors & Officers liability insurance for small business. This cover provides protection for the individual directors and officers of the business for claims brought against them in respect of their legal liability resulting from their position in the company.

Arranging liability insurance for small business is a most important part of your business strategy and should be given full and careful consideration to ensure that the covers are correctly arranged and meet your specific business requirements.

At Greenfield Insurance Services we will talk to you about your business and develop an small business owner insurance programme that will protect the future of your business. We will explain the Insurance covers available and obtain competitive quotations for you, at the same time explaining what the Insurances will do and the options available. This will allow you to make an informed decision about how to proceed with your liability insurance for small business.