How to set up small business insurance

This content was reviewed in June 2024. 

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Setting up business insurance for your company isn’t as simple as just buying cover to protect it. With so many parts of your business to consider insuring, and so many policies and packages available for different business types, there is a lot to think about to set up insurance successfully.

Our insurance experts from FSB Insurance Service explain what you need to know, the things to expect, and what to consider to set up business insurance that’s right for you. From legal requirements to ways of purchasing, we share our top tips for arranging your business insurance.

Do your research

Finding the right insurance for your business is crucial to keeping it fully protected. Before starting, it’s important that you know or have access to key information about your company. This allows you to know the types of policies you might need, what insurance you’re entitled to, and what is best for your business.

This includes:

• The nature of your business
• Your company’s annual turnover
• The number of employees you have
• Your insurance claims history

Just like your home or car insurance, it’s helpful to do your research and shop around to compare the different insurance premiums that providers offer.

What insurance will my small business need?

Insurance is an important part of any business, and it’s the foundation of a solid Business Continuity Plan. This process helps you to plan for the future and get to know your business. It can give you the peace of mind to get back to your day, safe in the knowledge that your business is secure.

There are different types of business insurance you can buy for your company, but some are required by law. These are:

• Employer’s Liability covers your legal responsibility for the safety of your employees, and should they be injured and awarded damages, Employer’s Liability will cover this cost.
• Motor insurance for any motorised vehicle that runs on a public highway (must cover third party property damages of at least £1 million under the Road Traffic Act).
• If you have plant and machinery involved in your business it legally requires an engineering inspection, covering items such as forklift trucks, lifting tackle and pressure plant.

Certain insurances are a contractual requirement, like insuring a building on behalf of your landlord, or holding a Public Liability policy when working for third parties. This is likely to come up if you are bidding for a public sector contract as a service provider.

Most insurance cover that is a legal obligation will come with a certificate of insurance, which you are required to keep as proof of cover for at least five years.

Other types of insurance you can set up for your business, include:

• Product Liability – covers claims concerning your products
• Professional Indemnity – covers claims involving your services
• Commercial Property insurance – covers claims concerning your business premises

As a business owner, you may want to consider cover for your building, contents and other liabilities too.

Are you a sole trader? Check out our handy guide to the essential insurance you need as a sole trader.

How much insurance will I need?

Now you know what you need, the next step is to figure out how much cover you need.

To help with this, it’s important to first check if any of your company contracts specify how much you cover you should buy. For instance, if you’re a retailer, a minimal level of Public Liability insurance might be required.

You should choose a limit of cover that you’re confident will cover all compensation costs. Think about what could go wrong in your business, what disputes could happen (claims made by your customers or staff) and how much a dispute might cost if it went to court.

If you’re unsure, it’s helpful to discuss your individual business circumstances with an expert small business insurance broker so they can advise you.

Where can I buy business insurance?

Insurance can be purchased from directly from insurers, but you will only be able to purchase an ‘off the shelf’ policy and not one that is tailored to your individual business circumstances.

Insurance brokers like FSB Insurance Service liaise between you and the insurer, making sure your needs are met and helping you in the case of making a claim. The team at FSB Insurance Service can make sure you get the information you need and may be able to provide quotations from multiple insurers.

When applying for insurance you can choose one or more type, or a package combining different policies. To give you a quote and find you a suitable insurance package, providers will usually ask you to answer a series of questions.

• Do you want to insure your equipment or stock?
• Do you want to protect your building in the event of a fire, flood or theft?
• Do you own or rent the building where your business trades?
• Do people visit your premises regularly?
• Do you offer a professional service to paying clients?
• Do you want other subsidiaries or associated businesses to be included in the insurance?
• How many employees might work for you in the next 12 months?

You’ll be asked to provide information about your business, such as contact details, address and when you started trading.

Once purchased, your insurance documents are usually issued by post. This includes a certificate that sets out your policy details and verifies that you have the insurance. Other details include the limits of your coverage, your policy number and the start and end of your policy. Keep this information safe, as you’ll need it if you need to make a claim.

How can I reduce my premiums?

The regular payments you’ll make on your insurance policy are known as premiums, and there are a number of ways you may be able to reduce them.

• Having a suitable risk management strategy in place to help protect the business.
• Arranging to pay a higher excess, which would mean you pay out more in the event of a loss to cover the damages before the insurer pays the claim.
• Review your policies when it comes to renewal time, which is especially important in a hardening insurance market.

Reducing your premiums is something an expert insurance broker can advise on. FSB members can register with FSB Insurance Service at no cost and have access to a wealth of services and assets, including an insurance advice line.

FSB Insurance Service Limited is authorised and regulated by the Financial Conduct Authority (FCA Registration No: 788654 ) Registered Office: 20 Fenchurch Street, London, United Kingdom, EC3M 3AZ. Company Number: 10831430