Small businesses tend to over-insure their equipment and under-insure their liability. Here is the order to think about cover in, and the one policy that is most often missing.
Small business owners tend to insure the things they can see. Laptops, stock, the van, the fit-out. Those are the easy losses to imagine — and they are rarely the ones that close a company.
The losses that do serious damage are usually liability claims and interruption to trading. Both are less visible and both are frequently underinsured.
Start with liability
Public liability covers injury or property damage caused to third parties by your business. If a customer trips in your premises, or your contractor damages a client's property, this is the policy that responds. It is the foundation, and the limit should be set well above what feels intuitive — legal defence costs alone can consume a low limit before any damages are paid.
Employer's liability covers injury or illness suffered by your staff. Where you have employees this is generally a legal requirement, and the definition of employee is broader than payroll — it can extend to labour-only subcontractors and, in some wordings, volunteers.
Professional indemnity covers claims that your advice, design or service caused a client financial loss. Anyone selling expertise rather than goods needs this: consultants, agencies, architects, accountants, IT firms. It is written on a claims made basis, meaning the policy in force when the claim is made responds — not the one in force when you did the work. That has an important consequence: if you stop trading, you need run-off cover, or old work is uninsured.
Then protect trading itself
Business interruption is the most commonly missing policy in small companies. It covers lost gross profit while you cannot trade following an insured event — a fire, a flood, a serious escape of water.
Two things go wrong with it. First, the indemnity period is set too short. Twelve months sounds generous until you consider how long it actually takes to find premises, refit them, replace equipment with lead times, and rebuild a customer base. Twenty-four months is often more realistic. Second, the sum insured is based on turnover rather than gross profit, which produces the wrong number.
Cyber cover has moved from optional to close to essential for any business holding customer data or dependent on systems to trade. The valuable part is usually not the liability limit but the incident response: forensics, legal notification obligations, and negotiation support, available immediately rather than after weeks of argument.
Then the physical assets
Property, stock, equipment and vehicles. Worth insuring properly, but they are the recoverable losses — the ones where a cheque solves the problem. Two points worth checking:
- Reinstatement versus indemnity. Indemnity settlements deduct depreciation. For equipment you would have to replace at current prices, reinstatement is what you want.
- Goods in transit and off-site. Standard property cover often stops at the premises boundary. Tools in a van overnight are a classic gap.
A sensible review rhythm
Once a year, before renewal, check that:
- Turnover and headcount still match what you declared. Both are rating factors, and a material change can affect a claim.
- Any new activity or service line is within the described business activity. Insurers rate on that description, and work outside it may not be covered.
- Sums insured reflect current replacement costs, not historic ones.
- Contract requirements are met — many client contracts specify minimum liability limits, and it is easy to sign one you do not satisfy.
Getting this right is largely about ordering the risks correctly: liability first, continuity second, assets third. We can review your current schedule and tell you where the exposure sits.