Insurance is sold as a bundle of products, which makes it hard to see what you are actually buying. A small business usually needs protection against three things: hurting someone, losing the premises and losing income while the business recovers.
This guide explains the core policies, the questions to ask before signing and the common gaps that only appear when a claim is made.
Key facts
- General liability covers third-party injury and property damage.
- Property cover protects stock, equipment and fit-out.
- Business interruption replaces income during a covered shutdown.
- Workers compensation is mandatory in most places with employees.
The four policies most small firms need
General liability responds when a customer trips in your shop or your work damages someone else property. Property insurance covers the building contents, stock, tools and fit-out. Business interruption replaces lost income while you repair. Workers compensation covers employees injured at work.
A professional indemnity policy is the fifth, and it matters if you sell advice, design or consultancy. A mistake in your work can cost a client far more than a physical accident. Many contracts will not be signed without it.
Match the policy to the real exposure
A home-based consultant with a laptop and no stock has a very different risk profile from a cafe with staff, equipment and customers on site. Buy cover for the loss that would end the business, not for every imaginable inconvenience.
List your assets, your contractual obligations and the events that would stop revenue for a month. That list is the brief for your broker. A policy chosen from a website dropdown without that brief is a guess.
Read the exclusions before the price
The premium is the least interesting number on the schedule. Read what is excluded: flood, cyber, employee dishonesty, faulty workmanship, wear and tear and damage by contractors are common gaps.
Check the policy wording, not the marketing summary. Ask the insurer to confirm in writing that a specific scenario is covered. If the answer is vague, assume it is not. A cheaper policy with a large exclusion is not cheaper when the claim is denied.
Set limits and deductibles deliberately
Limits should reflect the cost of rebuilding or replacing, not the price you paid five years ago. Index them annually. For liability, check whether contracts require a minimum limit; a client may demand more than your standard policy provides.
A higher deductible lowers the premium but raises the cash you need at the worst moment. Choose a deductible you could pay tomorrow without borrowing. If you cannot, it is too high, however attractive the saving looks.
Insurance is not there for the things you can afford to lose. It is there for the ones you cannot.
Do not buy the same cover twice
Many small firms end up with overlapping policies sold by different advisers: cyber cover inside a package, legal expenses on a professional policy and a separate add-on doing the same job. Duplication raises cost and complicates claims.
Map every policy on one page with its limits, deductible, exclusions and renewal date. Ask each broker what the others already cover. One coordinated programme is usually cheaper and far easier to manage than three unrelated policies.
Review after every change
New premises, new staff, new equipment, a new product line or a jump in revenue can all change your exposure. Tell the insurer before the change, not after the loss. Non-disclosure is the most common reason a claim is reduced or refused.
Set a calendar reminder for the annual renewal and start comparing six weeks early. Use the renewal to check limits, exclusions and whether the business still needs every policy. Our cash flow guide shows how to budget the premium without a surprise.
Build a simple risk plan alongside the cover
Insurance pays after the event. A risk plan reduces the chance of the event and the size of the loss. Back up data, train staff, secure the premises, maintain equipment and keep emergency contacts where everyone can find them.
Document what you would do in the first 24 hours after a fire, flood or cyber incident. Insurers move faster when the claim is well evidenced. Photographs, receipts, asset registers and a call tree cost little and save weeks.
Official source: sba.gov.
