Business Insurance: What Cover Does a Small Business Need?

Business insurance makes more sense when you begin with the bad day you could not comfortably pay for. That might be an injury, damaged customer property, stolen equipment, an allegation about your advice or a long interruption to trading. Start there, then look for cover that matches the work you really do.

Last checked: 29 August 2026.

The cover that can be compulsory

If you become an employer, employers’ liability insurance is normally a legal requirement. GOV.UK says the policy must usually provide at least £5 million of cover and come from an authorised insurer. There are limited exceptions, so check your own position rather than assuming a family business or one-person company is exempt.

Other insurance may be required by a regulator, professional body, landlord, lender or customer contract. A requirement in a contract is not the same as a legal duty, but ignoring it can still put the work or agreement at risk.

Common covers in plain English

• Public liability: claims that somebody was injured, or their property damaged, because of your business activities.
• Professional indemnity: claims arising from professional advice, design or services that allegedly caused a client a financial loss.
• Buildings, contents, tools and stock: physical items and premises, with limits and conditions that should match where they are kept and used.
• Business interruption: loss of income or extra costs after an insured event disrupts trading. The event, waiting period and length of cover matter.
• Product liability: claims involving products that your business makes, supplies or sells.
• Cyber cover: selected costs and liabilities following incidents involving systems or data. It does not replace basic security or a recovery plan.
• Legal expenses, directors’ cover and commercial vehicles: useful in some businesses, irrelevant in others. The policy wording decides what is actually covered.

Public liability or professional indemnity?

The distinction is easier with examples. A visitor trips over your equipment and is injured: that points towards public liability. A client says a report, design or piece of advice caused a financial loss: that points towards professional indemnity. Some firms face both kinds of risk.

Do not rely on the policy name alone. Describe the activities, customers, locations and contracts honestly, then check that the insurer has accepted them. If a material part of the work is missing from the description, a cheap policy can be expensive when it matters.

Write down the risks before requesting quotes

1. What work do you do? Include the awkward or occasional jobs, not only the neat description on the home page.
2. Who could be affected? Employees, contractors, customers, visitors and members of the public create different exposures.
3. Where does the work happen? Premises, homes, client sites, events, vehicles and overseas work may change the answer.
4. What is the biggest credible loss? Think about injury, replacement cost, lost trading time, legal defence and a client’s possible financial loss.
5. What do contracts require? Note the required type of cover, limit, territory and how long it must remain in place.
6. What has happened before? Claims, incidents and changing activities need accurate disclosure.

Compare the wording, not just the premium

Put quotes side by side. Check the work covered, the limit for each claim and the total limit. Compare the excess (what you pay towards a claim) and the main exclusions (what the policy does not cover). Also check the territory, subcontractor rules, legal defence costs and any security or storage conditions. Check whether the price includes insurance premium tax. If you pay monthly, ask whether this is credit that costs extra.

For interruption cover, ask how the insurer works out the income at risk and whether the selected period would genuinely be long enough to recover. For equipment or stock, check replacement values and whether items are covered away from the main premises.

Keep the policy useful after purchase

Tell the insurer or broker when the business changes rather than waiting for renewal. New services, staff, premises, higher turnover, overseas sales or different storage arrangements can all matter. Keep certificates, schedules and the full wording together, and make sure more than one trusted person knows how to report an incident.

If something happens, prevent further harm where it is safe to do so, keep evidence and notify the insurer promptly. Do not promise payment or accept blame simply to end an uncomfortable conversation. Follow the claims instructions in the policy.