There are a number of different types of insurance available to businesses. Some of those are optional but should be seriously considered because without them, an unexpected loss could threaten your business. However, some of them are compulsory to have.
The main types of compulsory insurance are:
- Employer’s liability insurance
- Motor insurance
- Public Liability insurance
- Property insurance
Employer’s liability insurance
Employer’s liability insurance covers compensation claims made against you by your employees.
The Employer’s Liability (Compulsory Insurance) Act 1969 (as amended) states that this type of insurance is required by law if you employ anyone, even if your employees are only employed on a part-time, casual or temporary basis. You can be fined up to £2,500 per day if you are not covered.
As well as having the insurance, you are also required to display a Certificate of Employer’s Liability. This must show:
- The name of our insurer
- The name of the person or business covered by the insurance
- The policy number
- The period of insurance
- A statement that the insurance complies with the legal requirements
You no longer have to display a paper copy of the Certificate of Employer’s Liability and a digital copy is now acceptable as long as it’s accessible by all of your employees. You are required to keep copies of your Certificates of Employer’s Liability for 40 years.
Motor insurance
Motor insurance comes in two forms:
- Third-party motor insurance which covers you if you are responsible for a road traffic accident and if a compensation claim is made against you by a third party
- Comprehensive motor insurance which covers your liability to third parties as well as covering theft of or damage to your own vehicle
The Road Traffic Act 1988 (as amended) states that you are required to have third-party motor insurance if you use a vehicle anywhere that the public can access. Obviously, this means using a vehicle on the road, but the legal requirement to be insured extends to places like private car parks if there are no restrictions on who can access them.
A Motor Insurance Certificate or Cover Note is required, although all motor insurance is now recorded on a central database so the police can determine whether a vehicle is insured quickly. If you’re driving an uninsured vehicle, you face a fine and points on your driving licence. Your vehicle could also be confiscated.
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Public liability insurance
Public liability insurance is like employer’s liability insurance, but it covers compensation claims made against you by third parties rather than claims made by your employees.
Unlike employer’s liability insurance and motor insurance, public liability insurance is not a legal requirement. However, in practice, if you don’t have public liability insurance you’ll find that your opportunities to work are restricted as some people will insist that you have this type of insurance.
In fact, often it’s a contractual requirement that you have public liability insurance. If this is the case, it’s important to check the contract to see if it specifies a minimum indemnity limit. The indemnity limit is the maximum an insurer will pay in the event of a claim. The standard limit is usually £1,000,000 but this can normally be increased for an additional premium.
Property insurance
Property insurance covers accidental damage to or theft of your property.
Property insurance is not a legal requirement. However, if someone has an insurable interest in the property that you own or are using, they may insist that you insure that property via a property insurance policy or a contract works insurance policy.
An insurable interest arises if someone stands to lose if the property in question is damaged or stolen. Example of people with an insurable interest include people who have loaned you money to buy some property, or people who have leased or hired equipment to you.
