With a cost of living crisis and an economic recession looming large in the minds of many business owners regardless of size and industry, many financial officers, accountants and CEOs are looking at ways they can reduce their outgoings.

As each company is different, the types of cost reductions vary as well, particularly with many industries facing a somewhat uncertain future, and some companies are looking through every expense with a fine tooth comb to see what they can function without.

One mistake some companies have made which has led to devastating professional and personal consequences is believing that your business can function without insurance, whether that takes the form of professional liability, employers’ liability or security insurance.

Part of the reason for this is not realising that certain insurance policies are a legal requirement to do business, particularly EL insurance, but another part is that in most non-required cases, a company takes out an insurance policy for a reason beyond it being nice to have.

In most cases, the initial policies are taken out with the help of advice from a financial advisor, accountant or planner, who understands the risks involved within a particular industry and therefore what type of package would suit your business best.

For example, if you run a consulting firm you may be legally required to take out a professional liability insurance policy to protect you and your clients in case of legal action caused as a result of this advice.

As well as this, if your business has any forward-facing element, public liability insurance is essential to protect against even the slightest chance of injury or damage to property caused as a result of the products or services you provide.

The protections provided by these insurance policies, combined with the relatively low long-term cost in comparison to the potential financial consequences of having to pay out of pocket for damages make getting rid of insurance policies the definition of false economy.