Be Smart: Insurance For Your Small Business

28/06/2017

Managing Your Money

Business insurance is an essential for any entrepreneur or business owner, but with so many different categories and classes out there, getting the right deal for your business can be tough.

It can be tempting to go for the bare minimum when choosing a policy, to avoid sifting through dozens of options and facing those additional costs - in fact, in 2016’s DNA of an Entrepreneur report by small business and home insurance specialists, Hiscox, it is noted that nearly a fifth of respondents said they had no insurance cover at all! But by making an accurate choice in insurance it can not only protect your business properly, but help you to understand potential business risks, and help your business secure the confidence and support it needs to grow.

Here’s our selection of tips and advice – and our Top 20 Tricky Insurance Terms Glossary! – to help you get started on protecting your business.

Understand Your Options

Different types of business insurance will provide different types of coverage. This could range from coverage against damages to your business’ property and equipment, protection against losses resulting from crime, and support if faced with a lawsuit. Make sure you understand which policies are necessary for your business.

When you know what you want, be sure to compare multiple quotes from a range of insurance agents, to ensure you are making an informed commitment. It can be helpful to speak to other business owners to see who provides their insurance, and if they’re happy with the service.

However, when comparing quotes do double check the coverage of each agreement. Policies may have the same name across the board, but the details of each contract may differ between suppliers. Be very clear on what is and isn’t included.

A spokesperson from Go Compare also advises to “think about combining different types of business insurance policies. For example, if you need both employee liability insurance and public liability insurance, a joint policy could prove cheaper and more convenient than arranging each policy separately.”

Beat The Jargon

Insurance Jargon

It can be tough to familiarise yourself with the jargon and complicated small print when it comes to insurance; but don’t worry, you are not alone - only 41% of respondents truly understand the insurance available to them. Here’s a handy glossary, breaking down our Top 20 Tricky Insurance Terms, to help you out with your research:

Business Interruption Insurance – cover that pays out expenses and loss of trading profit caused by an ‘insured peril’ such as flood, fire, or earthquake that forces your business to temporarily close or relocate.

Concealment – the act of leaving certain information out of your insurance applications in order to keep your premiums down; it is likely to render your policy void.

Corporate Legal Liability – covers a company, not an individual, against prosecutions for mistakes, negligence, and violations of health and safety, tax, or trading standards law.

Cyber Risk Insurance – protects your business from hacking, computer viruses, and online identity theft. Hiscox’s 2016 DNA of an Entrepreneur report has found that more than 1 in 10 businesses had suffered from a cyber-attack.

Employers’ Liability Insurance – a legal requirement for nearly all businesses that employ people. This protects against claims made if an employee has sustained an injury whilst working for you.

Excess – the amount a client must pay towards an insured claim.

Key Person Insurance – a sum paid if someone who is vital to your business if unable to work due to illness or injury; a variant of personal accident insurance.

Limit of Indemnity – the maximum your insurer will pay out. This will work in one of two ways: the first is called “any one claim” (AOC). This is the total amount the insurer will pay for each single claim during the policy period. The second is called “aggregate” and is the total amount an insurer will pay for all claims during the policy period.

Loss Adjuster – an expert, in association with an insurance firm, that assesses the size of an insurance claim and helps to find ways to get your business back to normal as soon as possible.

Maximum Indemnity Period - this refers to the maximum period the insurer will cover loss of earnings for, so ensure you settle on a suitable period; this is particularly important if you’re taking out business interruption insurance.

Negligence – failure to do something; an important concept in many types of business insurance, particularly professional indemnity (PI) and public liability (PL).

Period of Insurance – the length of time that an insurance contract lasts, details of which will be listed in your policy agreement.

Personal Accident (PA) Insurance – compensation for your business if you or an employee suffers an injury that prevents them from working, either temporarily or permanently.

Premiums – the price to buy an insurance policy, calculated according to the risk of a claim occurring.

Professional Indemnity (PI) Insurance – covers against claims made by clients if you are found to have made mistakes, or been negligent in the services you’ve provided for them. Also known as Errors and Omissions (E&O) Insurance.

Public Liability (PL) Insurance – covers you against claims made by members of the public, usually taken if they’ve injured themselves on your property or used a faulty product of yours that has caused them damage.

Risk Management – a process involving the identification and mitigation of risks that may affect your business.

Third Party – the party making a claim against you. The insured (you) is the second party, and the insurer is the first.

Trade Credit Insurance – an insurance policy / risk management product that protects your accounts from loss due to credit risk such as insolvency or bankruptcy; offered by private insurance companies and governmental export credit agencies.

Underinsurance – this is when the sum insured or limit of indemnity in your agreed policy is too low and doesn’t provide adequate cover for the risk insured.

What The Experts Say

Insurance Advice

A few words on accessing coverage and addressing the current trending policies in business insurance; the experts know best...

Mark Shepard, Manager for General Insurance at The Association of British Insurers, on trade credit insurance:

“Small businesses are central to the UK’s economy, innovating in the market and contributing to the country’s productivity. However, thy can also be more vulnerable to financial setbacks, and customer insolvency or late payment can have a greater impact than it does for larger businesses.

“Trade credit insurers can play a vital role in helping small businesses through these challenging circumstances...it is crucial for all businesses to help them navigate potential risks. In particular, SMEs looking to grow can have confidence that a trade credit insurance policy will help them to do this whilst guarding against the unexpected.”

Peter MacDonald, Insurance Advisor at Murray & MacDonald Insurance Services, on researching policies:

“Go talk to a few local agents and ask them about workers compensation and a business owners policy. That should be sufficient to get you off to a good start. As convenient as webchat, texting, email, and phone calls are (all of which professional agents do for their clients), it is best to set up appointments and visit a few agents, in person.

“This will help you “kick the tires” and get a sense of whether or not you like and can trust your future agent. A good agent will listen to your unique situation and make recommendations based on his or her experience.”

Roberta Anderson, Director at Cohen & Grisby P.C., on cyber risk insurance:

“Insurance can play a vital role in a company’s overall strategy to address, mitigate and maximize protection against the losses and exposures relating to a ransomware attack.

“When committing to a policy, make sure to obtain a “discovery” trigger. Cyber extortion coverage should specify that the coverage is triggered by the insured’s “discovery” of a threat, rather than by the occurrence of an incident after a certain “retroactive date.”

“And don’t take “no” for an answer. Unfortunately, even where there is a legitimate claim for coverage under the policy language and applicable law, an insurer may deny an insured’s claim. Organisations that refuse to take “no” for an answer may be able to secure valuable coverage if they effectively pursue their claim.”

 

Sources

The Hiscox 2012 DNA of an Entrepreneur Study – Hiscox

The Hiscox 2016 DNA of an Entrepreneur Study - Hiscox

Beginners’ Guide To Business Insurance – Go Compare

New Figures Show How Small Business Are Big Winners With Trade Credit Insurance - ABI

The Role of Insurance in Small Business Ownership – Cape Cod Times

Finding the Right Insurance Coverage Helps Mitigate Ransomware Exposures – Business Insurance

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