As a limited company is considered a separate legal entity from its owners, the question of whether you need business insurance can be answered in two ways:
1. Do I Need to Buy Insurance for My Limited Company?
A limited company is a separate legal entity from its owners, which provides certain protections and responsibilities. It can sue and be sued, enter into contracts, and pay its own liabilities. Owners benefit from limited liability, meaning their personal assets are generally protected from business debts.
By ensuring your company is adequately insured, you safeguard against risks that could otherwise harm your business or personal finances. Protecting your limited company with the right insurance coverage helps you run a smoother, more secure operation.
Employers’ liability insurance
If you employ anyone, you are legally required to have employers’ liability insurance. This cover protects your business if an employee is injured or becomes ill due to their work. However, there are some exceptions. If you are the sole director and employee of the company, you are not legally required to have this insurance.
Failure to secure the proper employers’ liability coverage could result in fines of up to £2,500 per day from the Health & Safety Executive, so it is crucial not to skip this.
Other Insurance Requirements:
- Commercial Vehicle Insurance: If your business owns any vehicles, at least third-party coverage is required to protect against injury or property damage caused by your drivers.
- Commercial Property Insurance: If your company owns property or has borrowing related to property, you will need to have sufficient property insurance, similar to residential buildings insurance.
- Professional Indemnity Insurance: Although not always a legal requirement, this insurance is mandatory for certain professions such as solicitors, financial advisers, architects, and accountants, as per their regulatory bodies.
Public Liability Insurance for Limited Companies
While public liability insurance is not a legal requirement, it is strongly recommended for businesses that interact with the public. This type of insurance helps cover the costs if a member of the public claims injury or damage due to your business activities. This coverage extends whether the incident happens on your premises or when employees are off-site. For example, if someone is injured after tripping over a sign in your cafe or slips on a wet floor in your office, public liability insurance can help protect your business from costly legal fees and compensation claims.
Is Public Liability Insurance Required in Business Contracts?
Many business-to-business contracts require proof of adequate insurance coverage, including public liability insurance. For example, IT contractors often must provide both professional indemnity and business liability insurance to be hired.
In some industries, such as construction, public liability insurance is mandatory for a business to operate. Some trade associations also require members to hold specific types of insurance. For instance, the Federation of Master Builders mandates certain coverage for its members.
2. Do I need business insurance as an owner of a limited company?
As the owner of a limited company, business insurance is typically taken out in the company’s name, as the company is a separate legal entity. However, this doesn’t mean you are exempt from the need for insurance. Certain policies, like employers’ liability insurance, are legally required if your company has employees. Additionally, directors and officers insurance can protect you personally against claims related to decisions you make as a company director.
Beyond legal requirements, your company may benefit from policies like public liability or professional indemnity insurance to protect against risks associated with its operations. While the company holds the insurance, these policies often indirectly safeguard you as an owner by minimising financial risks and liabilities to the business.
Get the Right Business Insurance for Your Limited Company
When it comes to protecting your limited company, having the right business insurance is key. Whether you are just starting out or looking to update your current coverage, understanding your options can make a big difference. Business insurance not only helps safeguard your company against potential risks but also gives you peace of mind knowing you are prepared for the unexpected.
To make sure you have the coverage that best suits your needs, our friendly team is here to help. We can walk you through your options, answer any questions, and guide you in choosing the right insurance package for your business. Don’t hesitate to reach out to us at 01609 773 748 or request a quote today. We are here to make the process simple and stress-free.