Business insurance: the basics
Liability and professional indemnity cover
Some forms of insurance protect against your legal liability for any damage or harm caused by your business, its products or services to customers or the public.
Awards for damages can be high, and could put you out of business, so you need to consider your business' exposure to these risks carefully.
Types of insurance to consider
- Public liability insurance covers damages and legal costs resulting from injury, death or damage to property caused to members of the public by any of your business activities. You're more likely to need this if customers or the public visit your premises, eg if you run a shop. It is a legal requirement for a few businesses, such as horse-riding stables.
- Product liability insurance protects your business if anyone is hurt or killed or their property is damaged by goods you have made, sold or repaired. You could be held liable for damage or injury caused by defects in your products' design or manufacture even if you haven't been negligent. It may be worth considering if you work in a potentially high-risk sector, such as the food, toy or electrical industries. Product liability cover is often included with public liability insurance.
- Professional indemnity insurance covers businesses giving advice or providing services in a professional capacity. It protects against legal liability for losses suffered by customers as a result of negligent advice. It's common in a number of areas such as management consultancy, IT consultancy, engineering and design. In some professions - such as accountancy, law and financial services - it's a legal requirement.
- Directors and officers of a limited company can be held personally liable for their actions in certain circumstances. You can purchase insurance to provide cover against this liability.
For information on these types of insurance, see liability insurance.
The Association of British Insurers (ABI) provides further information on business insurance.