A report in Money Week suggests that some small companies stopped paying at least one type of insurance during the pandemic in an attempt to reduce their overheads. While in some ways this is understandable, as the lockdown left many businesses fighting for survival, the article warns that cancelling insurance policies is false economy.
It is illegal in some cases for a business to operate without certain types of insurance, and if it is discovered to be doing so, the business owner could face steep fines or other penalties. For example, it is a legal requirement for businesses who employ even just one member of staff to have employers’ liability insurance.
If the business uses a vehicle, it is also required by law to have motor insurance, with a minimum of third-party cover providing £1m of insurance for property damage and an unlimited amount for personal injury.
While it is not always a legal requirement to have public liability insurance, business owners are taking a huge gamble if the company interacts with people who are not employees.
For example, if customers or clients visit the business premises for any reason, and as a result sustain an injury, illness, or damage to their property, they are entitled to claim for compensation. Public liability insurance is designed to help cover any damages awarded to the claimant, and help with legal costs to the business owner.
The pandemic has also highlighted the need for business interruption insurance, which is designed to pay out if the business is unable to trade due to temporary closure of the premises. This could be because of a fire or flood, but small businesses recently successfully challenged for Covid-19 claims in the courts.
While all businesses are free to assess the risk in certain areas of insurance, it can prove a lot more costly in the long run to opt out of certain types of cover.
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