Not sure what insurance your business needs? We break down what’s legally required, what’s recommended, and what you can skip. Plain English, no jargon.
So, what insurance does my business need?
It’s one of those questions that sounds simple. But when you actually try to find the answer, you get buried in insurance jargon, long product lists, and policies you’ve never heard of. And the frustrating part? Most of what you read doesn’t tell you the one thing you actually want to know. What’s legally required and what’s just a nice to have?
Let’s fix that. We’ll go through every type of business insurance worth knowing about, tell you which ones the law says you must have, and explain the rest in plain terms so you can decide what’s right for you.
Which business insurance is a legal requirement?
Here’s the honest answer. Only one type of business insurance is required by law in the UK. That’s employers’ liability insurance. If you employ anyone, even one person, even part-time or seasonal, you need employers’ liability cover. The minimum is £5 million, and it covers claims from staff who are injured or become ill because of their work. The Health and Safety Executive (HSE) enforces this. If you don’t have it, you face a fine of up to £2,500 for every single day you’re uninsured. That adds up fast.
The only businesses exempt are sole traders with no employees and some family businesses where every employee is a close relative.
There’s one other legal requirement that catches people out. If your business uses vehicles on public roads, you need motor insurance. That applies to vans, company cars, fleet vehicles, anything with wheels and an engine that leaves the premises. But that’s not unique to businesses. It’s the same law that applies to everyone.
Everything else? Recommended. Sometimes strongly recommended. But not legally required.
What about public liability insurance?
Public liability is probably the most common business insurance policy in the UK, and most people assume it’s a legal requirement. It isn’t. But it might as well be.
If a customer, supplier, or member of the public is injured on your premises or because of your work, public liability insurance covers the claim. A delivery driver trips on a loose cable in your office. A passer-by slips on water outside your shop. A client’s property is damaged while you’re working on site. These things happen, and the claims can run into hundreds of thousands of pounds.
Most commercial landlords require it in their lease. Most clients require it before you start any job. And most trade associations include it as a condition of membership. So while the law doesn’t force you to have it, the reality of running a business does.
Cover typically ranges from £1 million to £10 million, depending on what you do and who you work with.
Do you need professional indemnity insurance?
If your business provides advice, designs, consultancy, or any kind of professional service, you should seriously consider this one.
Professional indemnity covers claims that arise from mistakes, errors, or negligent advice in your professional work. Say you’re an accountant and a miscalculation costs your client money. Or you’re a web developer and a bug brings down a client’s e-commerce site for a week. Or you’re an architect and a design flaw leads to expensive remedial work. That’s where professional indemnity steps in.
Some industries require it by regulation. Solicitors, financial advisers, and accountants can’t practise without it. But even if it’s not a regulatory requirement for your sector, many clients will ask for it contractually before they’ll work with you. Especially larger organisations and public sector bodies.
What other insurance should your business consider?
Business interruption insurance
A fire. A flood. A supplier is going bust. If something stops your business from trading, you still have rent to pay, wages to cover, and overheads that don’t pause just because your income has.
Business interruption insurance covers the lost revenue and ongoing costs while you get back on your feet. It’s one of those policies that feels unnecessary until the day you need it.
Contents and equipment insurance
Your office furniture, computers, stock, tools, and machinery. If any of it is damaged, stolen, or destroyed, contents insurance covers the replacement cost. For some businesses, the equipment is worth more than the premises. A kitchen full of commercial appliances, a design studio packed with hardware, a workshop full of specialist tools. Think about what it would cost to replace everything tomorrow morning.
Cyber insurance
This one is becoming essential. If your business holds customer data, takes online payments, or relies on IT systems to operate, you’re a target. Cyber insurance covers the cost of data breaches, ransomware attacks, regulatory fines, forensic investigation, and the business interruption that follows. It’s not just a big company problem. Small businesses are targeted precisely because they tend to have weaker defences.
How much is all of this going to cost?
That depends entirely on your business. A sole trader consultant will pay far less than a construction firm with twenty staff. But it’s worth knowing that insurance costs are going up across the board. According to the Premium Credit Insurance Index, 51% of SMEs say insurance costs have risen in the last 12 months.
The key is making sure you’re covered for the right things, not paying for policies you don’t need. And that’s where getting proper advice makes a real difference. Not sure what cover you need? Get a quote today.
What insurance does my business need by law?
Employers’ liability insurance is the only policy required by law for most businesses. You need a minimum of £5 million in cover if you employ anyone, and the fine for not having it is up to £2,500 per day from the HSE. Motor insurance is also legally required if your business uses vehicles on public roads.
Is public liability insurance a legal requirement?
No. Public liability insurance is not required by law. However, most commercial landlords, clients, and trade associations require it as a condition of doing business. For most SMEs, it’s the most common policy after employers’ liability.
What is professional indemnity insurance, and do I need it?
Professional indemnity covers claims arising from mistakes, errors, or negligent advice in your professional work. Some industries require it by regulation, such as legal and financial services. Even if it’s not required in your sector, many clients will ask for it contractually before working with you.
How much does business insurance cost for a small business?
It varies widely depending on your industry, turnover, number of staff, and the types of cover you need. A sole trader may pay a few hundred pounds a year, while a business with employees and premises will pay more. According to the Premium Credit Insurance Index, 51% of SMEs say their insurance costs have risen in the last 12 months.
Can I get all my business insurance in one policy?
Yes. A commercial combined policy bundles several types of cover into one arrangement, typically including public liability, employers’ liability, contents, and business interruption. It’s often simpler and more cost-effective than buying each policy separately. Tell us about your business, and we’ll connect you with an insurer who can put the right package together.