There is no law that requires your business to have public liability insurance. However, some large organisations require you to have it, and will not do business with you unless you are insured.
In a similar instance, if your equipment is damaged, lost, or stolen and you don't have insurance, then you'll have to pay the costs of repairing or replacing it out of the business' income. If this cost is substantial it could seriously put the financial future of the company at risk.
There's only one policy you're legally required to have as a small business, and that's employers' liability insurance (EL). EL covers your business in the event that one of your staff members claims they've suffered an illness or injury as a result of working for you.
Most employers must have employers' liability insurance. This protects your business against claims from employees for accidents or sickness they may suffer as a result of working for you.
Do you need business insurance if you are self-employed?
Insurance for the self-employed
Depending on the type of business you have, you may be required by law to have certain business insurance policies in place. Many small businesses take out public liability insurance, especially if customers visit your premises or you work on theirs.
Some sole traders think that their business is too small to worry about insurance but this couldn't be further from the truth. Small businesses often face the same risks as much larger companies and Public Liability insurance is almost always needed; whatever size business you run.
'Sole trader' describes your business structure, while 'self-employed' is a way of saying that you don't work for an employer or pay tax through PAYE. Both terms are often used interchangeably: if you're self-employed then you're basically running a business as a sole trader.
The only type of business insurance that is mandatory under UK law is employers' liability cover, which is a legal requirement for most businesses that employ staff, even on a casual basis. However, you may find that regulators require you to have certain types of insurance in order to operate.
You must have motor insurance to drive your vehicle on UK roads. Third party insurance is the legal minimum. This means you're covered if you have an accident causing damage or injury to any other person, vehicle, animal or property.
In the UK, employers' liability insurance is compulsory if you have employees, subcontractors or anybody doing work experience. This will cover you against any claims in the event of disease, injury, illness or death of any of your staff, in the course of their work.
What is the penalty for driving without business insurance?
Penalties for driving without insurance
If the case goes to court you could get an unlimited fine and be disqualified from driving. The police also have the power to seize, and in some cases, destroy a vehicle if it's being driven without insurance.
The average annual cost for standard PL insurance in the U.K. runs about £118 for small businesses but can be significantly higher for those operating in high-risk fields. Public injury claims in the U.K. can cost upwards of £100,000 in some extreme cases, though most fall between £10,000 - £20,000.
How many points do you get for no business insurance?
An IN10 conviction is given to those who are caught driving without insurance. It will remain on your licence for four years and is often accompanied by 6 to 8 points.
It's illegal to drive a vehicle on a road or in a public place without at least 3rd party insurance. Even if the vehicle itself is insured, if you're not correctly insured to drive it you could get penalised.
Car insurance became mandatory under the Road Traffic Act of 1930. The Act required drivers to be insured against any physical harm to another person by the use of a vehicle. This was amended under The Road Traffic Act of 1988 to include compulsory insurance against third-party property damage.
Business car insurance is necessary if you use your car for business purposes. You need business car insurance if you drive to between several locations, or if a colleague regularly takes your car to visit clients. You will also need it if you drive hundreds of miles a week for business purposes.
If you are self-employed and work entirely on your own, you won't need employers' liability insurance. However, it is important to remember that you may need other types of insurance cover, such as public liability, product liability or professional indemnity insurance.
The most commonly purchased business liability covers include employers liability, public liability and professional liability insurance, each offering financial protection from demands for compensation whereby you may be legally liable.
What is small business insurance? Business insurance covers you for financial losses if something unexpected happens while running your business, like legal claims, theft or damage to property and stock. Even small businesses need business insurance.
What is the difference between self-employed and running a business?
'Sole trader' describes your business structure, while 'self-employed' is a way of saying that you don't work for an employer or pay tax through PAYE. Both terms are often used interchangeably: if you're self-employed then you're basically running a business as a sole trader.
Someone can be both employed and self-employed at the same time, for example if they work for an employer during the day and run their own business in the evenings.
Being a sole trader and being self-employed are basically the same thing. As a sole trader, you run your business as a self-employed person. It is your responsibility to manage the success of your business. All sole traders are self-employed.
As a sole trader you do not pay yourself a salary or wage. Instead any payment that you make to yourself is called a 'drawing'. Any profit that you make in your business is yours and it is from this that you can take 'drawings'.
Many self-employed people consider income protection insurance and critical illness cover in case they get too sick or injured to work, or get a serious illness. People who have dependents, such as a partner or children, often choose to get life insurance.
