25 March 2025
Do I need business insurance?
6 minutes
Proper coverage for your small business brings peace of mind — but is it mandatory?
When you start a new venture, you’re bombarded with questions to answer. Up with urgent matters, such as What machinery should I invest in? and What font should I use for my new logo?, there’s the ever-pressing, Do I need business insurance?
The short answer is yes — if you have employees you must have business insurance. Not having proper coverage in place can lead to nasty fines and trouble with the authorities.
However, staying compliant is not the only reason for having business insurance. The right protection will secure your most important assets and ensure that your business is taken care of if anything unforeseen happens.
Small business insurance needs
So what insurance does a business need? That depends on factors such as:
- Who you employ
- The types of products and services you offer
- The assets you have
- Your dealings with the public
- The vehicles you own and use
- Your appetite for risk
We’ll take you through the most important questions to ask so that you can assess the types of insurance that might be relevant for you. It’s then a good idea to get professional advice to ensure you get the right policy to suit your needs.
An important part of any business development is making sure it’s properly covered. Chat with the Howden team about your growing business and all its insurance needs.
Is it a legal requirement to have business insurance?
If you employ anyone, including remote workers, employer’s liability insurance (EL) is a legal requirement in the UK. You will also need EL if you have volunteers working for you or use subcontractors. Essentially, if any people fall under your supervision, you must ensure you are properly covered to stay compliant with the law.
You are generally exempt from having to meet this requirement if your employees are:
- All immediate family members
- Abroad
To stick within the legal requirements of the Employers’ Liability (Compulsory) Insurance Act of 1969, your EL insurance policy must:
- Cover you for at least £5 million
- Be issued by an authorised insurer. Check with the Financial Conduct Authority (FCA) to see if your insurer is authorised.
Howden can help you with the process of finding the right EL insurance for your business that keeps you compliant and properly protected.
Also, an important part of any business development is making sure it’s properly covered. Chat with the Howden team about your growing business and all its insurance needs.
What happens if I have no business insurance?
Not having EL insurance can result in a fine from the Health and Safety Executive (HSE) — and it can get hefty: £2,500 for every day you do not have the coverage in place.
You could also get a fine of £1,000 if your EL certificate is not on display or you refuse to show it when asked to by an inspector.
The risk of having to pay out large sums in fines is not the only reason to have EL insurance in place. Regardless of industry, accidents happen. The right insurance coverage is the difference between those accidents being a mild inconvenience or an outright disaster.
EL insurance is particularly important for industries that require employees to do risky work (for example, mining, agriculture, and construction are high on the list).
But it’s important to have EL insurance in other industries too. If an employee, volunteer or subcontractor gets ill or injured while working for you, EL will help cover a range of different expenses. These include any legal and medical bills that are part of their compensation claims, as well as any income they lose due to the illness or injury they sustained.
Is it worth having business insurance — other than EL?
While other kinds of business insurance are not a legal requirement, they are recommended. The right policy for your business will depend on your industry, company size, and the degree of risk you want to take.
While EL insurance will cover you if your employees are injured on your premises, it won’t if a member of the public is. This is covered by public liability insurance — an important type of coverage that will also protect you if you accidentally damage someone else’s property while working on it.
Just as you should be insured against injury and illness, you should also protect your most important assets. It’s a good idea to cover the vehicles that keep your business moving, the equipment and machinery that keep it running, and the IT infrastructure that keeps it connected.
What business insurance do I need?
Employment Liability Insurance is a legal requirement in the UK.
Other types of insurance that are recommended include:
- Public liability (PL) insurance: If you host other people on your business premises or do work on other people’s property, it’s important to have public liability insurance in place. This will protect you if a member of the public makes a claim against you because they get injured or damage their property on your grounds. It will also cover you if you accidentally cause harm to someone else’s premises.
- Professional indemnity (PI) insurance. You will need professional indemnity insurance if a client claims financial reimbursement due to your services being damaging or negligent. This is particularly important for those who issue professional advice (lawyers, architects, accountants and financial advisors, for example) and/or do creative work.
- Contents and portable equipment insurance. This type of insurance exists to protect your business contents from the unforeseen — think fire, floods, theft. Standard contents insurance is there to protect everything inside, while, as the name suggests, portable insurance is there to cover items on the move (laptops and cameras, for example).
- Commercial motor insurance. Protect the vehicles that keep your business moving. Commercial motor insurance comes in various forms depending on your needs, including:
- Fleet insurance for your entire team of vehicles
- Specialist coverage for large vehicles like buses and coaches
- Heavy Goods Vehicle (HGV) and haulage insurance which protects both vehicles and their cargo.
- Directors’ and officers’ liability insurance. This coverage protects you as an individual from claims that could be made against you as a result of your business activities.
It will cover legal fees and compensation costs related to things like breaching health and safety standards or making an error in your financial reporting. It may be a prerequisite for investors wanting to get involved with your company.
- Cyber liability insurance. While this kind of insurance may have previously only been necessary for IT firms, it’s now a consideration for any company that keeps a database of their clients, runs an app, or has an online presence. Cyber liability insurance will cover you in the event of a data breach or cyberattack.
- Product liability insurance. Product liability insurance will protect you from claims against you that your products caused injury or illness, or property damage. It’s a good idea to invest in this type of insurance if your business involves making, selling and/or distributing goods.
For an in-depth look at what types of business insurance are available, head here.
Do you need business insurance if you are self-employed?
While it’s not mandatory to have business insurance in the UK if you do not employ anyone, it’s recommended that you protect the assets that are most important to your business. If you’re self-employed, this is no different.
Consider that if you’re self-employed, your most vital asset is YOU.
As a result, you may consider income protection insurance, which is designed to cover you if you are unable to work due to illness, injury or disability.
You might also want to think about private health insurance which may give you access to things like shorter wait times to see a doctor, quick access to specialists, and a private room if you ever find yourself in hospital.
Deciding on what insurance package is best for you will also depend on the products and services you offer. If you give professional advice, for example, you may want to consider professional indemnity insurance. If your vehicle or equipment is necessary to your income, they should be covered too.
Quickfire summary
In the UK, you need business insurance if you employ other people. There are exceptions to this rule, however. You’re exempt if you only employ immediate family members or all your employees are based abroad.
While it’s not a legal requirement to have other kinds of insurance in place, it’s recommended. Thinking about eventualities ahead of time can ensure that you’re not left high and dry if something goes wrong.
The types of insurance policies you agree to will depend on the kind of business you run. Look into:
- Public liability insurance
- Professional indemnity insurance
- Contents and portable equipment insurance
- Directors’ and officers’ liability insurance
- Cyber liability insurance
- Product liability insurance
If you are self-employed, it’s not a legal requirement to have business insurance as you don’t employ anyone else. However, as with any enterprise, it’s important to adequately protect yourself and your assets. The type of cover you choose will depend on the nature of your business. Regardless of industry, income protection insurance is a good idea as it will cover you in the event of illness, injury or disability.
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