A limited company’s insurance requirements depend on a number of factors, largely its line of work, where it operates, how many members of staff it has, its turnover and other risks.
All businesses that have at least one employee – permanent or temporary – are legally required to have employers’ liability insurance to protect against compensation claims of illness, injury or death of an employee.
Some industry bodies or regulators require its members hold other insurance, and this differs from industry to industry so it is worth a business checking membership requirements of any organisation it wishes to be affiliated with.
Similarly, some clients demand businesses hold certain insurance policies as part of the terms of their contract. Other insurance products are a choice but can be wise depending on the industry the business operates in. Business insurance experts NimbleFins have more detail on insurance products for limited companies if you’d like to learn more.
Professional indemnity insurance – If a business sells a service, its expertise, or a trade, and poor decisions or mistakes could cause a client financial loss.
Covers: Legal costs of defending and dealing with claims from clients of financial loss due to negligence or error, and compensation payments.
Examples of industries that frequently take out professional indemnity insurance: Accountancy, architects, consultants, construction, tradesmen.
Public liability/product liability insurance – If a business comes face to face with members of the public, such as customers, suppliers, salesmen, passers-by.
Covers: Legal costs of defending and dealing with claims from third parties injured or who have property damaged and a business is blamed; compensation payments.
Examples of industries that take out public liability insurance: Pubs, hairdressers, shops, tradesmen, construction.
Commercial property insurance – For businesses that own or rent their premises.
Covers: The cost of replacing contents in the building, plus – if the business owns the premises, the cost of repairing or rebuilding a damaged property, plus extra costs incurred while the premises is unavailable. Can cover stock, but this is sometimes an add-on.
Examples of industries that take out public liability insurance: Any that own or rent work space, or that have a lot of stock.
Tax investigation/legal expenses – For businesses faced with contract disputes, employment disputes, tax investigations, debt recovery, property protection, identity theft.
Covers: Access and funds for legal assistance in the above scenarios and more.
Examples of industries that take out tax investigation/legal expenses insurance: Any that fear they wouldn’t be able to cover the costs themselves or wouldn’t know how to get help.
Cyber insurance – Connects policy holders to computer and legal experts for advice and practical help to get a business back up and running as quickly as possible. Particularly useful for businesses that handle sensitive data and banking details.
Covers: Managing a cyberattack, cyber extortion, recovering lost data, business interruption costs, compensation claims by those affected, reputation management, privacy claims, defamation.
Examples of industries that take out cyber insurance: Online shops, software developers, website owners, healthcare, businesses that handle sensitive and private data on behalf of customers or clients.
Directors and officers insurance – Purchased by the company for the directors to reimburse them for losses incurred for negligence or mistakes alleged by shareholders, investors, employees and regulators.
Covers: Legal advice, representation and compensation.
Examples of industries that take out directors insurance: Any that have one or more director and feels their decisions put them at risk of claims of negligence from stakeholders.
Business interruption insurance – If an unexpected event causes physical damage to a premises or vital equipment meaning a business’s profitability drops. This could be due to fire, flood, storm, earthquake, lightning, or if essential equipment breaks down.
Covers: The value of lost turnover, the value of higher working costs (e.g., having to move to a temporary location).
Examples of industries that take out business interruption insurance: Any that rely on a fixed premises or equipment to carry out work, and that could not cope financially without them.
What insurance is required for a limited company?
The only insurance required for a limited company legally is employers’ liability insurance. The rest are merely advised and suggested, and are a business’ choice after weighing up the risks with its line of work.
Some industry bodies and regulators demand certain insurance is taken out to be a member, others even have minimum requirements of that insurance. The Financial Conduct Authority, for example, insists accountants are covered for up to €1,250,000 for a single claim and an amount equivalent to 10% of annual income, up to £30million in aggregate. The Association of Plumbing and Heating Contractors Limited (APHC) requires public liability insurance with a minimum of £2 million cover, against plumbing, heating and mechanical services.
Many limited companies – particularly bigger ones dealing with higher value contracts – are required to hold professional indemnity insurance as part of its agreement with their client.
Public liability insurance is one of the most popular business insurance products. In 2019/20 there were 72,000 public liability claims in the UK and payments in 2019/20 amounted to £6.64 million according to the Government’s Compensation Recovery Unit.