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Insurance Considerations for Start-ups

Thursday, 10 October 2013

Positive, forward thinking entrepreneurs do not generally dwell on worst case scenarios. But factoring risk analysis into business planning is a must. In order to achieve its goals, a business must match its growth ambitions with practical risk considerations and insurance.

Start-up entrepreneurs and small business owners should also be aware that some types of insurance are legally required.

General Insurance Considerations

Certain types of business insurance may be necessary for the day-to-day running a business depending upon the nature of its operations and the related risks.

Business continuity insurance acts as a safety-net in a worst-case scenario. Floods and fire may seem unlikely and it can feel like writing a cheque for something you will never need. Nevertheless, these kinds of occurrences do happen and they can be particularly detrimental to a new business.

Building insurance typically covers the repair of damage to buildings. These policies can also cover the loss, damage, destruction or theft of stock and equipment. New businesses with a strong technological focus should pay particular attention, as it can be used to protect losses stemming from disruptions caused by fire and damage.

Liability Insurance

Businesses are legally required to have at least 5m of liability insurance. If an employee is injured or taken ill in the workplace, this is covered by employer’s liability insurance. A new business with a small workforce may see this as something to scrimp on. But with around 400 deaths and 30,000 major injuries at work each year, this is ill advised.

Public liability insurance while not compulsory, is imperative for any new business which has contact with members of the public. This covers a business for damage against property or persons that might encounter during work activity.

Professional Indemnity Insurance

Professional indemnity insurance can protect new businesses providing professional services from crippling compensation claims. It pays out for claims of negligence or poor advice, making it a key cover. Some businesses must be covered.

Professional indemnity insurance is not always compulsory but many clients will expect it, particularly where it is an industry norm. A good cover can be the difference between you and a competitor, and as such it is an important consideration for any new business providing professional services.

Legal Costs Insurance

Legal costs wrack up hefty charges in a short space of time. For small, cash-strapped start-ups this can be particularly damaging.

Some general insurance policies can be extended to cover legal expenses, or it can be purchased in its own right.


When it comes to business insurance, there is not “one size fits all” and its needs to be tailored to a business’ specific needs. It is important to get a policy that is right for your business and contains all the features you are looking for.

Businesses should not pay out for unnecessary cover but, at the same time, scrimping can make a worst case scenario a stark reality.

For more information about business insurance obligations or business insurance claims, please contact James Crichton via e-mail or by telephone on 0207 611 4848.