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The very nature of a limited company ensures your business is a separate legal entity from you, the business owner, meaning you’re not wholly liable for its debts and assets.
This gives you a degree of protection from the risk of a poor quarter or a bad business decision.
What it doesn’t do is protect your business from the financial liability of a lawsuit in the event of an injury, accident or claim of negligence. Similarly, your business is not protected from the debilitating costs of loss, theft or damage to stock, premises or equipment.
Limited company insurance is the best safety net you can have against these scenarios, giving you the security of financial support and compensation for an affordable monthly cost.
This page will explain exactly what types of insurance your limited company should take out in order to be protected, as well as the factors that affect your premium and how to find a great policy.
What is limited company insurance?
Limited company insurance is not a specific policy. Rather, that term refers to a basket of insurance policies which, combined, should protect your limited company from many of the most common pitfalls you’ll face on your business journey.
A good insurance package for a limited company could include financial protection and compensation for your business against anything from injury and property damage to bad advice, fire, theft and floods.
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Limited company public liability insurance
Whatever the nature of your limited company, public liability insurance is one of the broadest and most useful types of insurance for any small business to take out.
With public liability insurance, your business will be covered if a third party or member of the public is injured or has their property damaged as a result of your business activities.
Whether a customer slips on your shop floor and breaks an arm or you scratch a client’s car with a ladder, public liability insurance will kick in to help with legal expenses and compensation claims.
Limited company professional indemnity insurance
If your business offers professional advice or services to clients, or handles their data or intellectual property, you should think seriously about adding professional indemnity insurance to your policy.
Limited company professional indemnity insurance provides financial protection if a client accuses you of negligence or says they’ve lost money as a result of using your services or following your advice.
In such an instance, professional indemnity insurance can cover your business for the legal and compensation costs if you are sued.
Other types of business insurance for limited companies
The only type of insurance your small business is legally required to have, assuming you employ anyone, is employers’ liability insurance. This covers you if an employee is injured, becomes ill, or their property is damaged while working for your business. It can also cover you if they cause an injury to a third party.
If you don’t have employers’ liability insurance, you could be fined £2,500 a day for each employee not covered.
But just because other types of small business insurance aren’t legally mandated, that doesn’t mean you should forget about properly protecting your limited company – especially when you consider that the costs of rectifying a disaster could be ruinous for your business.
It could be a good idea, then, to protect the physical assets of your business from loss, theft, or damage. You can protect your office, shop or storage facility with business buildings insurance, which will cover any repair or rebuilding costs, and the contents of your business, including stock, tools and equipment, with business contents insurance and stock insurance.
You can also get specialist insurance for the tools of your trade, whether that’s your own handheld hammer or a rented road roller.
It would also be a mistake – and potentially a very expensive one at that – to neglect protecting your non-physical business assets. We’re talking about cyber breaches and data losses, both of which can
be seriously damaging, financially and reputationally. If you want your limited company to be protected in cyberspace as well as in the real world, then we’d urge you to consider adding cyber and data insurance to your policy.
Do I need limited company insurance?
In the eyes of the law, the only small business insurance you absolutely 100% must have is employers’ liability insurance – and that’s only if you employ any staff, be they temporary or full time.
However, your business – and your livelihood – deserves more than just the bare minimum of protection.
Limited companies face risks on many fronts. Whether it’s an injury, bad advice, or a break-in, all these eventualities have costly consequences that could be ruinous if your business isn’t adequately protected.
So rather than asking yourself whether your limited company needs a comprehensive insurance policy, ask yourself if you could afford to pick up the pieces if something were to go seriously wrong.
» MORE: Compare Business Insurance
What does limited company insurance cover?
Limited company insurance can cover your business against a variety of accidents, disasters, and unforeseen circumstances involving clients, customers, employees, and members of the public.
Your limited company insurance policy could include:
- Public liability insurance
- Professional indemnity insurance
- Employers’ liability insurance
- Business buildings insurance
- Business contents insurance
- Stock insurance
- Tool insurance
What isn’t usually included in limited company insurance?
Above, we’ve detailed some of the most common and useful types of cover that you should consider including in your limited company insurance policy.
However, limited companies are broad in scope, and you should make sure that your policy covers your specific profession, service, or activity. Only you know what that looks like for your business.
If the worst should happen and you don’t have appropriate cover, your provider won’t pay out.
How much does limited company insurance cost?
The cost of limited company insurance can vary from one business to the next, although the more cover you want, the more you should expect to pay.
As a general rule of thumb, you should assess the risks your specific business faces, identify the worst case scenario, and establish how much cover you’d need to protect your business in such an eventuality.
For example, a business that only infrequently interacts with the public will need much less public liability insurance than a business that needs to interact with the public on a daily basis. The higher your coverage limit, the more you pay, whether that’s public indemnity or tool insurance.
Limited Company Insurance FAQs
Most limited companies should be well protected with public liability insurance, public indemnity insurance (if you provide professional services or advice), employers’ liability insurance (if you have staff), business premises, and business contents cover. Of these, only employers’ liability insurance is a legal requirement – and that’s only if your business employs anyone.
Unless you have employees, a limited company doesn’t have to be insured. If you employ even one member of staff, however, you’re legally required to have employers’ liability insurance.
As a limited company, you’ll need employers’ liability insurance if you employ any members of staff.
If you don’t have business insurance and somebody makes a claim against your business for injury or property damage, or if your premises burn down or your equipment is stolen, you’ll be responsible for paying any legal, compensation, replacement or rebuilding costs in full.
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