In short: If you employ anyone, you almost certainly need employers' liability insurance by law – at least £5 million of cover, with some exceptions. If you use a vehicle for work, it must be insured for business use. Beyond that, insurance is optional, but public liability or professional indemnity cover is often expected by clients.
Not every business needs the same insurance, and some need very little. Use this checklist to work out what applies to you. For a fuller explanation of each type of cover, read our guide to business insurance for UK owners.
Question 1: do you employ anyone?
If yes, you usually need employers' liability (EL) insurance from the day you become an employer. This is a legal requirement. According to GOV.UK:
- cover must be at least £5 million from an authorised insurer
- you can be fined £2,500 for every day you are not properly insured
- you can be fined £1,000 for not displaying or producing your certificate
"Employees" can include part-time, temporary and casual staff. There are some exemptions, for example if you only employ close family members. Check the GOV.UK rules or ask your insurer if you are unsure.
Question 2: do you use a vehicle for work?
Any vehicle on the road needs at least third-party insurance. If you drive to clients, carry tools or deliver goods, tell your insurer – personal policies often exclude business use.
Question 3: do you meet the public or work on their premises?
If customers visit you, or you work in clients' homes or offices, consider public liability insurance. It covers claims if someone is injured or their property is damaged because of your business. It is not a legal requirement, but councils, venues and larger clients often ask for it.
Question 4: do you give advice or provide a professional service?
If a mistake in your work could cost a client money, consider professional indemnity insurance. Some professions and regulators require it.
Question 5: do you make or sell products?
Product liability insurance covers claims caused by products you make, import, supply or sell.
Question 6: do you have equipment, stock or premises?
Contents, stock and buildings insurance protect against theft, fire and flood. If you work from home, your home insurance probably does not cover business equipment or stock – check with your insurer.
Question 7: do you hold customer data or rely on IT?
Cyber insurance can cover the cost of data breaches, ransomware and system downtime.
Question 8: could you keep going if you could not trade for a month?
Business interruption insurance can replace lost income after an insured event, such as a fire or flood.
Your quick checklist
- Employing staff? Arrange EL insurance before their first day.
- Using a vehicle for work? Make sure it is insured for business use.
- Meeting the public? Consider public liability.
- Giving advice? Consider professional indemnity.
- Selling products? Consider product liability.
- Equipment or stock? Check contents cover.
- Holding data? Consider cyber cover.
- Check what your contracts, landlord and lenders require.
Tips for buying cover
- Be honest about what you do – incorrect information can void a policy.
- Compare policies on what they cover, not just price.
- Check excesses and exclusions.
- Check your insurer is authorised on the Financial Conduct Authority (FCA) register.
- Review your cover every year and when your business changes.
A limited company is not a substitute for insurance
Trading as a limited company usually protects your personal assets from business debts. But a large claim could still wipe out the company itself. Insurance and limited liability work together.
How Form My Company can help
We do not sell or advise on insurance, but we get your company ready to buy cover. Insurers and clients will ask for your company number and address. Our Privacy Package gives you a registered office and service address, and our Fully Inclusive Package adds PAYE registration if you are taking on staff. Most companies are registered within 24 hours. For advice on the right cover, speak to an FCA-authorised broker.
Frequently asked questions
Is business insurance compulsory in the UK?
Employers' liability insurance is compulsory once you employ staff, with some exceptions, and vehicles must be insured. Most other covers are optional.
I am a sole trader with no staff. Do I need insurance?
There may be no legal requirement, but public liability or professional indemnity cover may be sensible, and clients may ask for it.
Does home insurance cover my business equipment?
Often not. Tell your home insurer you work from home and ask whether you need extra business cover.
What happens if I employ someone without EL insurance?
You can be fined up to £2,500 for every day you are not properly insured.