Insurance – what is it and why do I need it?

My guest blog post this month is from Chris Slack is Director and Owner of LN&G Indemnity Ltd.  Here he explains the types of insurance available to you as a business and why you need it.

 

Most businesses require insurance cover in some form or another in order to protect from losses incurred through the running of the company. Insurance comes in many forms but the main covers often include:

Public Liability:

This protects your company against claims for injuries to third parties and their property following a negligent act by you and your employees.  This may occur when clients are attending your premises or vice versa. Another example may include works that you are undertaking and you may cause damage to surrounding vehicles or injury to the public.  Whilst this cover is not always a legal requirement, the potential for something to go wrong is always there and with policies covering you up to £10m there could be serious financial loss to your company without it.  It will cover you against legal defence fees and compensation. This cover is all the more relevant particularly if your company involves manual work and if your business activities involves contact with a lot of people in person.

Products Liability:

Product liability insurance protects against claims of personal injury or property damage caused by products sold or supplied through your business. If your business designs, manufactures or supplies a physical product that is sold or given away for free then your business may be held legally responsible for any injuries to people or damage to property caused by a faulty product. Product liability insurance will cover you for legal defence costs and compensation in the event of a claim being made against you.

Employer’s Liability:

If your company employs people, then by law (with few exceptions) you must have employers’ liability cover in place to cover you for financial compensation to your employees in the event of an accident or illness at work. – For example, an employee may trip on something at work and cause injury to themselves or fall from height following a breach in health and safety or lack of duty of care.   Many people may think that there is little chance of an incident occurring to any employees particularly if they are working from home and so may be tempted to go without cover.  However, employers still have a duty of care and a risk assessment should still be carried out to ensure the environment in which the employee is working at home still meets adequate health and safety standards. This may also include suitable chairs and correct setup of computer equipment.

Whist a certain onus is put on the employee to inform their employer of any changes to their environment and whilst it remains somewhat of a gray area as to how far an employee could hold the employer responsible for any injury whilst working from home, it is none the less a legal requirement for a company to have employers’ liability. Most insurance policies provide cover to some extent for remote workers but this can be limited to basic clerical work with other limitation and conditions. It is therefore wise to check with the insurer before allowing employees to work from home. The definition of employee includes full or part time staff, labour only contractors or even work experience students. Some businesses are unaware of the legal requirement behind this cover and if a business is found to be without it, then they can face up to £2,500 per day fine for every day you are not properly insured

Professional Indemnity: 

This type of cover is needed if your company gives advice, or provides a professional service to clients in some form, including design work. This could include occupations such as management and business consultants, training consultants, accountants, solicitors or professional designers. Furthermore, it is often a requirement if you handle client data or intellectual property.  This cover will protect you against clients who may lose out financially or professionally due to negligence in your work whether it be through mistakes or bad advice. It will cover you for legal fees and compensation payments as a result. Your clients may also require you to have Professional Indemnity insurance even just to bid for contracts.

 

Important difference between claims occurring and claims made policies

The majority of Public and Employers Liability are covered on what is known as a ‘claims occurring’ basis. This means that you are protected from any incident for the duration of the policy period regardless if the claim is reported after the cover has lapsed or cancelled. However an important difference, and not one that everybody is aware of, is that Professional Indemnity polices usually provide insurance on what is known as a claims made basis, which means that it will only provide coverage for incidents that are reported during the period of cover and if they have occurred during the policy period or within the agreed retroactive date (which is advised by you when you take out the policy) to cover you for past incidents.

Policyholders sometimes make the mistake of cancelling this cover prematurely believing they no longer need it and any past claims for the period in question will still be covered. This is not the case so it is therefore important that they continue to have a professional indemnity policy in place or if the company has ceased trading then a run off policy is required.  A run off policy is an annual renewable policy to cover you for professional indemnity claims for previous work of the company that has ceased trading until you feel you no longer require it. The premium for this type of cover will often reduce as each year passes.

Other types of insurance

Directors & Officers / Management Liability:

This is an important consideration for any business to consider. This cover is aimed at individuals who hold management responsibility within the business rather than the business as a whole. It will cover them personally for claims including breaches of health and safety laws, misadministration of company pensions and errors in financial reporting. It is something often required by investors of company and without it the penalties can be significant.

Cyber Liability:

With record cyber-crimes occurring and continuing to crow cyber liability insurance is an important cover to consider. It is designed to mitigate your risks by covering such things as data breaches and cyber-attacks. Cyber liability covers you against legal and compensations claims and fines under the GDPR often including a fast recovery plan to get you up and running again.

These are just some of the main covers available for your business. Other covers might include property damage for your premises and contents or contract all risks cover to cover you for building work and plant if you are a construction firm, business interruption insurance in the event of an insured peril stopping you from continuing your business or even credit insurance to protect you against any clients who do not pay you. There are a whole host of covers available and often you require the services of an insurance broker to properly understand your insurance requirements for your business.

 

Chris Slack is Director and Owner of LN&G Indemnity Ltd.  We are a commercial insurance broker providing all types of business insurance for all manner of industries at competitive prices.

At LN&G indemnity we focus on finding you the most appropriate cover and at the best possible premium.  All too often you may find your broker may become a little complacent in finding you the best deal particularly if you have been with them a number of years.  We ensure that you get the best deal every year and not just in the first year of you taking your insurance through us. We also do not charge admin fees for any changes you wish to make to your policy throughout the year.

We have many happy clients for which you can check out our testimonies at our website .  You can be sure that we will look after you.