Business

Profit or loss: Why business insurance makes sense, whatever your outgoings

It doesn’t matter whether you’re a small business, a large corporate entity, or a simple sole trader, business insurance is a vital component to any successful venture and should not be overlooked, no matter the cost. Forking out for business insurance policies like public liability insurance and employers’ liability insurance may seem like something you can do without, but the truth is that when something really does go wrong and the claims are made, you’re going to regret not purchasing business insurance. Here are just a few reasons why business insurance is vital to your success.

What is business and Key Person insurance?

Business Insurance is one of the most important assets that any business can have. Not only does it protect your workforce against any financial loss in the event of injury or negligence, but it also protects you against any third-party claims that are made against you in the event of an accident or damage. Although employers’ liability insurance is a legal requirement in the UK, public liability insurance remains an optional overhead. Despite the costs involved if something does go wrong, many people opt for a short-term cost-saving rather than looking at the bigger picture and the huge financial costs that could arise when forking out to pay for someone’s compensation package or medical fees.

Key Man Insurance (also know as Key Person Insurance) is also very important to have if you manage either a small or big business.

According to statistics, only 28% of UK business’s established in the last two years have any kind of business protection in place. Yet 46% would cease trading immediately if a key person died. Key Man Insurance is a policy taken out by a business to insure their most valuable employee’s (key people). The policy is designed to protect the company from the financial impacts of losing their key people through death or illness. The business owns the policy and is the beneficiary of any payout.

Policies can be taken out as a life only insurance or with critical illness included. The benefit is a tax-free lump sum which is paid to the company in the event of a claim. The cover is taken out over a term, normally a 5 year or 10 year guaranteed premium depending on how long you think it’s needed.

How can it improve your business?

Insurance can improve your business in more ways than one. The first is financially; business insurance provides that much-needed fall back just in case something does go wrong. Let’s say one of your employees is injured at work, or there’s an accident on a construction site – who’s going to pay for the damages and compensation? Paying out for these costs without valid business insurance could mean financial ruin for your business. Secondly, possessing valid business insurance is a great way of securing better contracts for your business, painting you as a responsible corporation and a professional workforce in the eyes of the hiring contractor.

Why does it make sense?

Although business insurance does come at a cost, we need to weigh these costs up with the amount of loss that could come your way if something does go wrong. You may be thinking that you’ve never experienced an accident in the 30 years you’ve been working in your trade. Getting Professional Indemnity Insurance always makes sense for your business since it can protect you incase things go wrong. The thing is that nobody plans for an accident – and an accident can happen at any time. If you’re considering the profits and losses of purchasing business insurance, then it’s important to weigh up the long-term costs and repercussions of not making this short-term purchase. You’re looking at expensive court fees and medical bills, potentially the solvency of your business, and the risk of bankruptcy across your personal finances

Business insurance is vital for any business looking to operate safely and responsibly in their chosen trade. Although it comes at a small, short-term cost, this temporary negative can certainly outweigh the enormous long-term financial troubles that could arise without valid public liability insurance.

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