Business guide
Small business insurance
what to consider and why
Insurance is one of those jobs that is easy to put off and painful to get wrong. This guide explains the main types of cover small businesses consider, the one that is compulsory once you employ people, and what to think about when you rent a unit.
Start with your risks, not a product list
Insurers sell dozens of products, and it is easy to buy cover you do not need while missing the one you do. A better starting point is to write down what could realistically go wrong in your business.
- Could a customer or member of the public be hurt, or their property damaged, because of your work?
- Could something you make or sell cause harm after it leaves you?
- What would it cost to replace your tools, equipment or stock tomorrow?
- Could advice or design work you give lead to a client losing money?
- How long could you survive if you could not trade for a month?
Take that list to a broker or insurer. It leads to a far better conversation than asking for "business insurance".
It also helps to know your numbers. Add up the replacement cost of everything in your unit, then estimate how much income you would lose in a month off. Those two figures guide the cover limits you need far better than guesswork.
Employers' liability: the one that is compulsory
If you employ people, GOV.UK says you must have employers' liability insurance from an authorised insurer as soon as you become an employer. It covers claims from employees who are injured or become ill because of their work.
Check the GOV.UK rules
GOV.UK currently states that the policy must cover you for at least £5 million and that you can be fined for every day you are not properly insured. There are limited exemptions, for example some businesses that only employ close family members, but these do not apply to limited companies. Read the official page before assuming an exemption fits you.
If you are a sole trader with no employees, this does not usually apply. It is worth revisiting the moment you take on even part-time help.
Other covers small businesses commonly consider
Public liability
Covers claims from members of the public who are injured or whose property is damaged because of your business. It is not a legal requirement in general, but many customers, venues and markets ask to see it.
Product liability
Relevant if you make, modify or sell physical products. It covers claims that something you supplied caused injury or damage.
Contents, tools and stock
Covers your own equipment and goods against theft, fire and damage, at your premises and sometimes in transit or at events.
Professional indemnity
For businesses that give advice or design work. It covers claims that your work caused a client financial loss.
Business interruption
Helps replace lost income if an insured event stops you trading for a while.
Vans used for work also need the right class of motor insurance. Check that your policy covers business use, and carrying goods or tools if you do.
Insurance when you rent a unit
When you rent premises, the landlord normally insures the building. That cover is for the structure, not for your belongings or your business. Your own stock, tools and equipment need your own cover, and so does your liability to visitors you invite in.
At The Rock Factory, insurance for your contents is not included in the rent, so arrange your own before you move in. The building's insurance is also the reason some uses are not allowed, including car storage and activities such as melting waxes or plastics, so check that your planned use has been approved.
For storage-only tenants, our separate storage insurance guide looks at insuring goods in store.
Tell your insurer the full picture
Many claims are reduced or refused because the insurer was not told something important. When you take out or renew cover, be clear about these points:
- Where you workGive the full premises address and say whether it is a unit, a shop or your home.
- What you do thereDescribe your activities accurately, including any tools or machinery.
- When you are thereMention if you work alone or late at night.
- What you keep thereGive a realistic replacement value for stock and equipment.
- What security there isDescribe it accurately. At The Rock Factory, that means a free CCTV app covering the entrance and the area outside the units.
Update your insurer when anything changes, including moving out of home or taking on staff.
Shopping around sensibly
Cheapest is not always best value. Compare the excess, the limits for single items, whether cover applies away from your premises, and any conditions about locks or alarms. A broker who knows small businesses can be worth it if your activities are unusual.
Keep a simple folder with your policies, renewal dates and an up-to-date list of equipment with photos and receipts. It makes claims faster and renewals easier.
Diarise your renewal date a month in advance. That gives you time to review what has changed in your business, get comparison quotes and avoid an automatic renewal at a higher price. If you have made a claim, keep the correspondence with your policy documents for future reference.
How needs differ by business
Every business is different, but some patterns are common. Use these as prompts for your conversation with an insurer, not as a checklist to buy from.
| Business | Covers often discussed |
|---|---|
| Online seller | Stock, goods in transit, product liability |
| Maker or crafter | Tools, materials, product liability, cover at fairs |
| Repairer | Customers' goods in your care, tools, public liability |
| Tradesperson | Public liability, tools in the van, employers' liability if you have staff |
| Consultant or designer | Professional indemnity, office contents, cyber |
One cover people often forget is goods belonging to customers. If you repair phones, reupholster chairs or service bikes, you may be holding valuable items that are not yours. Check that your policy covers them while they are in your unit.
Before you act on this
This is general information, not insurance or legal advice. We are not an insurer or broker and cannot recommend specific products. Policy terms vary widely, so read the documents carefully and speak to an authorised insurer or broker about your own business. Check GOV.UK for the current employers' liability rules.
Questions
Is public liability insurance a legal requirement?
Not in general. It is often requested by customers, venues and market organisers, and many small businesses choose it for peace of mind. Employers' liability is the one GOV.UK lists as compulsory once you employ people.
Does The Rock Factory insure my stock?
No. Insurance for your contents is not included in the rent, so arrange your own cover for stock, tools and equipment before you move in.
Do I need employers' liability if I only use freelancers?
It depends on the working relationship. GOV.UK explains who counts as an employee for this purpose, so check the guidance or ask an insurer.
Why is car storage not allowed in Rock Factory units?
Because of the building's insurance. It is one of a few uses we cannot permit, alongside activities like melting waxes or plastics and bulk flammable liquids.
Will my insurer want to know about the CCTV?
Insurers usually ask about security. Describe it accurately: at The Rock Factory, that is a free app giving access to CCTV covering the entrance and the area outside the units, plus your own lockable roller shutter or security door. Do not claim alarms or other features that are not there.
Sources and official guidance
Prices are subject to availability. Minimum rental term: one month, then one month’s notice to leave. Electricity usage is charged separately at the supplier rate, with no markup. Business use needs prior approval. Car storage is not permitted.
