Currently, there are around 5.7 million small and medium-sized businesses in the UK. Unlike large firms, SMEs are unlikely to have the resources to recover from damaging weather or unforeseen events. Despite this, underinsurance is common for SME owners. Research by AXA showed that over half of new businesses are operating without insurance. Seventy-five per cent of these businesses weren’t insured because they thought they were too small to be at risk, while the other 25 per cent hadn’t even thought about it.
Owning a business comes with risks, therefore, it is important that you are protected against potential dangers. Here, we take a look at five key reasons to insure your business and avoid out of pocket expenses.
- Protection against unforeseen events
Sadly, it is impossible to predict the future. It really would be excellent if we could anticipate a devastating flood or fire —but we can’t. Whether you work from home or a commercial premises, the correct business insurance can provide you with the peace of mind that your property and its contents are protected against unexpected damage from specific perils.
Without insurance, your business could be seriously impacted by the repair and replacement costs along with loss of income if you cannot trade whilst repairs are being carried out. Of course, this is a far from ideal situation.
- Protection against legal action
As a business owner, you have a legal responsibility to provide a safe environment for your customers and their as well as your employees. If anyone is injured or their property damaged due to your negligence, you could be presented with a huge liability claim.
For example, if you operate a boarding kennel or cattery or run a dog walking business, you would need kennel insurance to protect against liability claims against yourself or an employee. It could entirely damage your business and credibility in the long run by not investing in relevant insurance.
- Insurance may be a contractual
One common practice of business is to form contracts. It may invalidate the contract if you don’t take out an insurance policy to protect yourself. There are a variety of reasons this may be necessary, including:
- Contracts with clients may include a legal requirement to be insured in case things go wrong.
- If you rent your business property from a landlord, you could need insurance for what your landlord doesn’t cover.
- If you are borrowing money to pay for equipment and outsourced material, it is highly likely that this loan will include a requirement for insurance.
- Attract and keep qualified employees
For many business owners, it’s only natural that you want to hire the highest skilled employees possible. And of course, as an employee, they are going to go for the businesses that offer further benefits beyond their salary.
To attract more employees, you need to entice them to want to work for you. This may include a range of additional benefits, such as life and health insurance. If you don’t offer these types of insurances, you could be shooting yourself in the foot by missing out on the best employees.
Most importantly, it’s the law! As soon as you take on employees, you are legally required to have Employer’s Liability insurance to provide cover if they suffer injury or illness as a result of working for you. Not doing so could open you up to lawsuits and a £2,500 non-compliance penalty for each day without it. Additionally, if you run a business that requires a local authority licence, it may be a requirement that Public Liability insurance has been taken out.
Be sure you’re aware of the risks that the type of business you run are open to. Thinking of insurance as unnecessary is a dangerous game to play. So, play safe.