Business insurance policies might feel like an expense you don’t really need, particularly if you’ve been in business for a few years without having had to make a claim. But it’s better to have it and not need it, than to need it and not have it.

Why? Because the costs of a claim for compensation against your business (whether the claim is made by a contractor working onsite, a client, member of the public or an employee) can be huge. The legal costs of defending a claim alone can run into tens of thousands of pounds. If you argue that whatever happened wasn’t your fault, the case can take months or years to resolve, and that means months or years of time having to be spent working on your case rather than on your business.


If you win your case, the other party might be ordered to pay your legal fees, but you will have had to pay them as the case has gone along, so it might have been years since you saw the money and you might not get its full value back. Money that you’ve had to pump into paying your legal team could have been spent on improving or developing your business.

If you lose your case, you will not only have to pay whatever compensation is ordered (which could be hundreds of thousands of pounds), you’ll also need to pay the other party’s costs as well as your own.

It’s easy to see why having business insurance in place is important to avoid this level of cost. There are different types of insurance available and what you need will depend on your business. You might need public liability insurance, employers’ liability insurance and/or professional indemnity insurance.

If you are not a limited company, then any debt the business has might have to come out of your own, personal assets if the business assets couldn’t cover it. That might mean that you have to sell or mortgage your house and forfeit any savings and investments.

Think also about other types of things that could go wrong for your business. Fire and theft are obvious examples of things that could put a serious dent in your ability to continue to trade, and if you lack adequate insurance the losses could be sufficient to make your business fail. If you rely on transport and tools to carry out your business and these are stolen, how will you run your business?

You can get specialist business insurance to cover different eventualities that your particular business might require, such as business premises insurance; tools and equipment insurance; key person insurance or business interruption cover. It’s a legal requirement to have Employers’ Liability Insurance of at least £5,000,000 in place if you have employees.

Having insurance in place will give you peace of mind and ensure that all your available funds and time go into your business, not into sorting out problems.

By Jasmina