There are legal insurance requirements that must be in place for all businesses. We also review other areas we strongly advise you to obtain cover for. This guide should help you understand and acquire appropriate cover.
There is certain insurance that you are required to have by law – and there are other basic types that we would advise, although not legally required, you should have to reduce your personal risk as a director.
REQUIRED: Employers Liability Insurance: by law in the UK you must have this insurance to protect your employees in the event of them being injured or becoming ill as a result of working for your company. By law, in the UK at least, the certificate of Employee Liability Insurance must be displayed in each place of work.
REQUIRED: Motor Vehicle Insurance for Business Use: If a car or motor vehicle is used for business use (other than just getting to work and back), it needs to have specific cover as such or claims may be invalid and a breach in law committed. You can continue to use your private motor car insurance firm but do let them know of this use so they can specifically note it and to be sure you are not breaking the law.
ADVISABLE: Basic Public Liability Insurance – Highly Advisable: This is usually bundled in with a basic “Public Liability” insurance to cover non-employees visiting your premises – who might have a tile fall on their head, or a scolding cup of coffee spilled on them by the receptionist. Cases can sometimes of course be more serious and you have a duty of care to ensure you insure the public against such risks.
ADVISABLE: Director Indemnity Insurance : there have been a whole new raft of acts that can make directors personally liable for the actions of a company, and there are a number of other areas where directors can potentially have claims made against them. It is therefore highly advisable for the directors to be insured against liabilities. Increasingly as the profile of this area has grown, standard packages are being offered by all the major commercial insurers and brokers.
ADVISABLE: General Office, Equipment and Buildings Insurance : It is usually advisable to have a general office insurance policy to protect fixtures and fittings, furniture and equipment such as computers against fire and theft. Your landlord will probably require the fire insurance as a minimum condition of the lease.
The above policies, in their simple form, are well established, and relatively inexpensive – they are also often available in packages for different industry groups. Firms that undertake inherently more dangerous activities, such as heavy engineering, will clearly have higher premiums and will require a greater level of analysis by the insurer.
Once you start Supplying goods – Product Liability Insurance
ADVISABLE / REQUIRED: Full Product & Public Liability Insurance: This is fundamentally advisable, and indeed required if supplying products to consumers or through intermediaries. Indeed some retailers in the USA require for them to be named on the cover itself – some insurers do not have experience of doing this swiftly and in our experience can delay deals so if you are to trade in the USA confirm that your insurer has experience and the ability to swiftly incorporate retail groups onto your product liability insurance.
Product Liability insurance protects the public from damage caused to them by your products or by using your products. You must state the countries in which you want cover, or indeed if you want it worldwide.
In addition to the nature of your products – a drug will clearly have a greater risk than a toothbrush – the policy premiums will usually be linked to your projected turnover, and its breakdown across countries if supplying internationally. You must therefore provide a reasonable and objective guess of what it will be. If it later appears you will exceed that projection inform the insurer and have your policy updated – make sure you remain within its terms – nominate someone in the company, and a director, to monitor insurance requirements so they are not overlooked.
You will find that cover for supplying the USA will greatly increase the price of the policy because of the litigious nature of its society. For retail supply in the USA the retailer has to be added onto your policy and that confirmed through a certificate from your insurer – if this applies to you ask the insurer to confirm in advance of the policy, and in writing, that they have experience of doing this, and swiftly, as we have seen insurer delays scupper commercial deals.
Warehousing “Stock” and Goods in Transit “Cargo Insurance” : it is advisable to have your own cargo insurance to cover the transport and delivery door to door. Most logistics providers have basic insurance, but it is often not sufficient for high value items. Many early stage companies cannot afford to loose an entire shipment to a major supplier. You should also ensure that all suppliers provide cover delivered through to you as many try to limit the insurance to it leaving their warehouse.
Other Advisable Insurance once shareholders invest significant resources
‘Key Man / Woman’ Insurance : Life / Illness Insurance to protect the shareholders in the event of the main driver / drivers of the business being run over by a bus or otherwise incapacitated.
Depending on cost, it is advisable that you bring in some high quality health insurance to protect against basic illness that may prevent some of the key management team form doing their job for an extended period. That way you can at least get some practical management help through the absence.
Other Insurances : There are a host of other policies available that you should consider depending on your attitude to risk, the specifics of your project, and your resources. They range from Legal Fees protection policies to Intellectual Property Protection Cover, covering the costs of bringing or protecting an action…