What type of Business Insurance do I need?

Starting a Business? Here’s What You Need to Know About Insurance

Setting up a new business is an exciting venture, but amidst the buzz of branding, budgeting, and building your dream, there’s one crucial area that often gets overlooked: insurance.

Whether you’re launching a consultancy from your kitchen table or opening a high-street shop, having the right insurance in place isn’t just a smart move, it’s essential – and sometimes a legal requirement.

In this blog, we’ll walk you through the essential insurance considerations for new businesses in the UK. We’ll start with the policies that are mandatory under UK law, and then explore other types of cover that might be relevant depending on your industry, operations, and risk profile. From protecting your people to safeguarding your premises, we’ll help you understand what’s needed to build a secure foundation for your business.

Mandatory Business Insurance in the UK

First things first, let’s talk about the mandatory insurance that every business owner in the UK needs to have.

Employers Liability

If you’re hiring staff (even just one person!) you’ll almost certainly need Employers’ Liability (EL) Insurance. This isn’t just a best practice; it’s a legal requirement under the Employers’ Liability (Compulsory Insurance) Act 1969.

EL insurance protects your business if an employee is injured as a result of the work they do for you. It covers the cost of compensation claims, legal fees, and associated expenses. Even if you follow all health and safety regulations, accidents can still happen and, without this cover, your business could face serious financial consequences.

• For employees, it guarantees access to compensation if they suffer harm.
• For employers, it provides a financial safety net that can prevent a single claim from crippling the business.

You must have cover of at least £10 million, the policy must be from an authorised insurer, and you must display your EL certificate where employees can see it, either physically or digitally.

You can be fined £2,500 for every day you’re not properly insured, and £1,000 if you fail to display the certificate or show it to inspectors.

Motor Insurance (if applicable)

If your business uses vehicles (even just occasionally) it’s essential to have the right type of motor insurance. Under UK law, all vehicles must be insured for the way they’re used meaning, if you drive for work-related purposes, outside of commuting to and from a single place of work, you will need to have business car insurance. Personal car insurance doesn’t usually cover: –
• driving to multiple work sites or client meetings
• transporting goods or equipment
• making deliveries or collections
• or attending off site events or training
If you have an accident whilst doing any of these things, your insurer could refuse to pay out a claim if you aren’t insured on the correct basis. It isn’t worth leaving it to chance.

Contractual Requirements

Next, we need to think about the insurances related to your contractual requirements.

Professional Indemnity Insurance

Professional Indemnity (PI) Insurance ensures that, if a client suffers a loss as a result of poor advice, a mistake, or negligence, they will receive fair compensation.

In the UK, if you are in a profession that is governed by a regulatory body, it is likely that there will be a requirement for you to have PI insurance in place as a condition of your membership or practice. Professions include solicitors, accountants, architects, surveyors and financial advisers and, without the correct PI insurance in place, they could face being struck off, fined, or barred from practicing.

Even the most experienced professionals can make mistakes, therefore it vitally important that you have the right PI cover in place.

Professional Indemnity insurance isn’t just for regulated professions like solicitors or accountants. It’s a critical safeguard for any business that provides advice, design, or specialist services, for example construction firms or engineering companies. In today’s complex projects, even minor errors in design, specification, or professional advice can lead to costly disputes, delays, and reputational damage. For example, a construction company recommending an unsuitable material or miscalculating structural requirements could face claims running into thousands, if not millions. Beyond mitigating the risk, many contracts now require PI insurance, making it a practical necessity as well as a strategic advantage for winning tenders and maintaining client trust.

Strongly Recommended Insurance Types

Once the mandatory and contractual insurances are sorted, then we would look at managing the risks that your individual business is exposed to.

Public Liability Insurance

Any new business that has interactions with the public, whether that be at your own premises, at a client location, or in a public space, should consider having Public Liability Insurance cover. The purpose of Public Liability insurance is to protect your business from financial losses if a third party (which might include a customer, client, or even a member of the public) suffers injury or property damage due to your business activities.

We would consider this cover to be essential if customers or clients visit your premises, or if you work off-site.

Products Liability Insurance

Products Liability insurance is especially important for new businesses that are going to be manufacturing or selling physical products. Even with rigorous testing, products can have design flaws, manufacturing defects, or inadequate safety warnings. The purpose of Products Liability insurance is to protect against injury or asset damage to a third party from a product which you manufacture or sell.

Under UK law, any party within the supply chain can be held liable for product related harm, we would advise having Products Liability Insurance in place to protect you, whether you are manufacturing goods, importing products from abroad, selling physical items (online or in a store), or distributing or repairing products.

Buildings and Contents

When starting up a new business, it will usually involve significant investment renting or buying premises, furnishing the space, or building up a supply of stock. The purpose of Buildings and Contents Insurance is to help protect that investment from unexpected events that would otherwise be financially devastating.

Buildings Insurance covers the physical structure of your business premises against fire, flood, storm damage, vandalism or malicious damage, subsidence, or accidental damage along with a number of other ‘insurable perils’. If you own the property, this cover is essential. If you are renting, the landlord would usually be responsible for this cover, but it is always best to double check.

Contents Insurance covers the items inside of the business premises, and is usually referred to as ‘Machinery, Plant, and All Other Contents’. The best way to think of it is the physical items that your business owns and that are used to operate every day. If you took the roof off your building, turned it up-side-down and shook it, your contents would be everything that would fall out. The exception to this being stock, which should be insured separately.

Contents Insurance protects you against burglary or theft, accidental damage, or damage caused by fire or water along with a number of other ‘’insurable perils’.

Goods in Transit or Marine Cargo Insurance

Goods in Transit or Marine Cargo Insurance is an important consideration if your new business sends out products, whether domestically or internationally.

Goods in Transit Insurance covers goods that are being transported over land, so either by van, truck or courier and is usually restricted to the UK if added onto a ‘Business Combined Policy’. Marine Cargo Insurance covers goods that are being transported over water or internationally, including air freight.

The purpose of both policies is to protect against the cost of goods being lost, stolen, or damaged during transit due to accidents, mishandling, or even environmental factors. For a new business, even a small loss can be a major setback. Without these insurances in place, the business is responsible for the full cost of replacing or refunding any lost or damaged items.

Other Insurance to Consider Based on Your Business Type

Finally, there are other covers, sometimes called ancillary insurance products, that might be relevant to your business, depending on your industry, operations and risk profile.

Cyber

In today’s digital world, Cyber Insurance is fast becoming a must-have for new businesses of any size. Many businesses fall into the trap of believing that a cyberattack won’t happen to them, either because they aren’t large enough to be targeted, or they don’t really have much to target. However, with most businesses these days relying on digital infrastructure or cloud services to store personal client data, CVs, customer payment data, or other data records, you are more exposed than ever to becoming the victim of a cyberattack.

A typical first-party Cyber policy will provide protection against incident response costs, data breach costs, business interruption compensation for lost income due to a cyber event, and any costs related to ransomware attacks, such as negotiation and potentially payment. It will also cover you for repairing or replacing any damaged systems and the cost of recovering lost data.

Business Interruption

Business Interruption cover is considered to be a critical safety net for new businesses where unexpected interruptions like fire, flood, or loss from any of the other typical ‘insurable perils’ can halt your business operations overnight. The purpose of the insurance is to help a business recover financially if they have been forced to cease operations for a period of time, and typically covers things like loss of income, fixed operating costs like rent or salaries, expenses related to any temporary relocation necessary, any loan repayments which still need to be made, plus any additional costs like renting equipment to minimise disruption.

Losing momentum early on can mean losing customers before you have had chance to establish a loyal relationship with them. Not to mention that even a few weeks of downtime could cause real financial strain to your business.

Business Interruption keeps on paying after a loss until the business is back in the position it was before, or the indemnity period is exhausted. Indemnity periods can range from 12 to 36 months. This is why it’s a vital life support for any business post loss – the difference between surviving and not in many cases.

Stock

Stock Insurance specifically provides protection for the goods that you intend to sell or use in production and is essential cover for any businesses which rely on physical inventory – whether you’re selling products, manufacturing goods, or storing materials.

Stock Insurance can cover finished goods ready to be sold, raw materials to be used in production (such as wood, fabric, or ingredients), goods in progress, and goods which have been paid for and not yet delivered to a customer.

Cover will typically provide protection against theft or burglary, fire or water damage, vandalism or malicious damage, and accidental damage along with a number of other ‘insurable perils’. Stock is often the biggest financial investment, meaning that replacing stock without insurance could be unaffordable.

Directors & Officers Liability (D&O)

D&O insurance protects company directors and officers from personal financial loss if they are sued for alleged wrongful acts while managing the company. This includes claims of breach of duty, negligence, misrepresentation, or errors in judgment. Without this cover in place, your personal assets could be at risk.

D&O insurance typically covers legal fees associated with defending a claim, settlement costs and any compensation payouts. D&O policies can also cover the entity itself along for alleged wrongful acts and also can be extended to pick up employment tribunal claims through ‘Employment Practices Liability Cover’.

Protecting your Future

No two businesses are the same, and your insurance shouldn’t be either. That’s why working with a knowledgeable insurance broker can make all the difference. At Caunce O’Hara Insurance Brokers Ltd (COHIBL), we take the time to understand your business inside and out. Through a thorough due diligence process, we identify your specific risks and exposures, then guide you through the essential, recommended, and optional coverages that best suit your operations.

We don’t believe in one-size-fits-all solutions. Instead, we focus on creating insurance packages that are as unique as your business.

As your business evolves, so should your insurance. Whether you’re expanding, hiring, or launching new services, regular policy reviews are key. By checking in with your broker regularly, you can make sure your cover keeps pace with your growth, avoiding any nasty surprises when renewal time rolls around.

At COHIBL, we’re here to help you stay protected, proactive, and prepared – every step of the way.