UK business insurance is a market crowded with broker calls and over-selling. The summary below is what we wish every customer knew before they signed an annual policy.
What is legally required
Employers’ liability insurance is the only mandatory business insurance in the UK, and only when you employ anyone other than the sole director. Minimum cover £5 million; most policies default to £10 million because the premium difference is tiny. Fines for trading without it are £2,500 per day. If you employ a single person, you need it from day one.
What is functionally required
Public liability insurance is not legally required but you cannot operate without it. Most landlords, customers and venue operators require £1 million or £2 million as a condition of access. The standard product is cheap (~£100-£300 a year for a micro-business) and covers third-party injury and property damage you cause.
Professional indemnity insurance covers losses caused to a client by bad advice or a mistake in your work. Required for solicitors, accountants, architects, consultants, IT contractors and similar — often a contractual condition. Premiums scale with claim limits and fee income.
Genuinely useful for many micro-businesses
- Cyber liability — covers data breach response, ransomware costs, customer notification under UK GDPR. For any business that holds customer data, this is now more important than physical contents cover. Premium: £200-£600 for typical micro-business.
- Tools and equipment cover — for trades. Replaces stolen / damaged tools, often including in-van overnight.
- Goods in transit — for anyone moving stock or product.
- Business contents — for office-based businesses with expensive kit.
- Business interruption — pays out if you cannot trade because of a covered event (fire, flood, sometimes cyber). Often bundled with property cover.
Often over-sold
- Key person insurance — useful for businesses with one critical person whose absence stops the company earning, but oversold to founders whose company would continue without them.
- Directors and officers (D&O) insurance — relevant when there are external shareholders or you sit on regulated boards; usually unnecessary for a sole-director micro-business.
- Legal expenses cover — sometimes useful, but many cover-only-after-the-event so you cannot use them to fund a fresh dispute.
How to buy
Use an FCA-authorised broker, not a comparison site. A broker has access to underwriters that comparison sites do not, can interpret exclusions properly and writes a single policy document that actually matches your work. The British Insurance Brokers’ Association (BIBA) has a free “Find a broker” service.
What to check on every policy
- Excess — what you pay on every claim.
- Aggregate limit — total annual payout cap.
- Exclusions — read these properly; “cyber excluded” on a property policy after a ransomware attack is a real example.
- Notification clause — most policies have a strict reporting window; missing it voids cover.
Get covered before you need to claim. Most micro-businesses spend £400-£900 a year for a sensible bundle of public liability + employers’ liability + cyber, which is less than a single afternoon’s billing.
