What Insurance Do You Need to Start a Business in the UK?

Starting your own business in the UK is a big step. Whether you’re opening a shop, setting up an online service, or launching a new consultancy, there are many decisions to make. One of the most important is arranging the right insurance.

Commercial insurance is designed to protect your business from risks and unexpected costs. It gives you peace of mind and helps you meet legal or client requirements. Without it, a single accident, legal claim, or natural event could lead to major financial damage.

In this guide, we’ll explain what types of insurance new businesses often need, what’s required by law, and how to choose the right policies for your needs. By the end, you’ll have a clear idea of how to get started with business insurance in the UK.

The Essentials: Cover Most New Businesses Need

Most businesses, no matter the industry or size, share a few basic risks. These core policies are the foundation of a solid commercial insurance plan. They help cover you against some of the most common and costly claims.

Public Liability Insurance

Public liability insurance covers claims made by people who aren’t employees, such as customers, clients, or visitors. It’s one of the most common policies in the UK.

If someone is injured or their property is damaged because of your business, this policy can cover legal fees and compensation costs. For example, if a customer trips over a loose mat in your shop, or a product you sell causes damage, this insurance helps protect you.

While it’s not legally required, many customers and venues will ask for proof of this cover. It’s highly recommended for almost all businesses that deal with the public.

Employers’ Liability Insurance

If you employ anyone, even part-time or casual staff, this type of insurance is usually a legal must. It protects your business if an employee is injured or becomes ill because of the work they do for you.

The law says you need at least £5 million of cover. If you don’t have it, you could be fined £2,500 for every day you operate without it. Even if you only hire someone for a short time, you may still need this insurance.

Professional Indemnity Insurance

This policy covers your business if a client claims that your advice or services caused them a financial loss. It’s common for consultants, designers, architects, IT professionals, and other service-based businesses.

Even if you didn’t make a mistake, legal fees can be high. This insurance helps cover defence costs and any damages owed. Some clients and contracts require you to have professional indemnity cover before they’ll work with you.

Sector-Specific and Situational Policies

In addition to the core types of insurance, your business may need extra cover depending on your industry, location, and day-to-day operations. These situational policies help fill gaps left by the essentials.

Let’s look at a few examples of policies that could apply to your specific situation.

If your business uses tools, equipment, or vehicles, consider getting equipment and stock insurance. This can protect against theft, damage, or loss. Builders, photographers, and mobile tradespeople often rely on this cover to keep their tools protected while working on-site or in transit.

If you manufacture, sell, or supply products, product liability insurance is key. Even if you didn’t make the product yourself, your business could be held responsible if it causes injury or harm. This cover helps you manage the risks linked with goods that fail or are unsafe.

Contents and buildings insurance protect your physical business space. Whether you rent an office or own a warehouse, you’ll want protection against fire, flooding, and vandalism. If you work from home, a standard home policy might not cover business equipment, so be sure to check.

Another useful option is business interruption insurance. If your business has to stop trading due to events like fire, flood, or theft, this cover can help replace lost income and get you back on your feet. It’s especially useful for retail, hospitality, and manufacturing businesses where downtime can be costly.

When Insurance Is Required by Law or Contracts

Not all insurance is optional. Some types are legally required, while others are needed to meet contract terms or professional rules. Failing to have the correct cover can result in legal trouble or lost opportunities.

As mentioned earlier, employers’ liability insurance is a legal requirement if you have staff. This applies to most businesses, even if the workers are volunteers or family members.

Motor insurance is another legal requirement. If your business uses vehicles, you must have at least third-party cover. This applies whether you own delivery vans or use a car for business travel. Staff who use their own cars for work may need business use added to their personal policy.

Some contracts, especially with councils or large companies, require public liability or professional indemnity insurance. If you can’t show proof of cover, you might lose out on the job.

In regulated industries, insurance may be needed to operate legally. For example, solicitors, accountants, and architects must have professional indemnity cover as part of their licence to trade.

Even landlords may ask for buildings insurance in commercial rental agreements. Read all contracts carefully and check if any insurance conditions are included. Not having the right policy could break your agreement and lead to extra costs.

How to Set Up Business Insurance the Right Way

Choosing and buying commercial insurance might seem tricky, especially when starting out. But with a clear plan and the right advice, you can build a policy that protects your business and fits your budget.

Here are a few key steps to help you get the right insurance in place.

Think About Your Business Risks

Start by listing all the possible risks your business could face. Think about your location, staff, customers, stock, and services. Ask yourself what could go wrong and what it might cost to fix.

This helps you work out what types of cover are most important for your situation. If you’re unsure, speak to a broker who specialises in small business insurance. They can help you avoid missing anything important.

Shop Around and Compare Quotes

Prices for insurance can vary a lot between providers. Use comparison websites or get quotes from a few insurers directly. Be sure to compare not only prices, but also what’s included in each policy.

Look at things like cover limits, excesses (the amount you pay if you make a claim), and exclusions. A cheaper policy may seem attractive, but it might not cover you in a serious situation.

Keep Your Policy Updated

Once you’ve arranged your insurance, keep it under review. Your needs can change as your business grows. Hiring more staff, offering new services, or moving premises are all reasons to update your cover.

Mark your renewal dates on a calendar and check the policy before renewing. Keeping your insurer informed helps avoid problems when making a claim. It also means you’re always covered for what you actually do.

Lastly, store your insurance documents somewhere safe and easy to access. Clients or regulators may ask to see proof of cover at any time.

In conclusion, commercial insurance is one of the most valuable steps you can take when starting a business in the UK. It gives you legal protection, peace of mind, and financial security. By choosing the right cover from the beginning, you give your business the best chance of long-term success.