By Qdos, in partnership with Caroola

Business insurance is designed to protect your company from financial loss when things go wrong. Without it, you could end up in a vulnerable position, facing high legal costs or a period out of work without any income.

So, what exactly does business insurance protect you against? What can happen if you don’t have it, and why could it help supercharge your business growth? In this guest blog, our partner Qdos – a leading UK business insurance provider – explains the importance of business insurance, the benefits and what to consider when choosing your policy.

What problems can business insurance protect you from?

It is not an exaggeration to say business insurance can keep your company afloat. Fighting claims or having to pay compensation if something goes wrong can be extremely expensive.

Insurance protects business owners against everyday risks, from mistakes leading to injury or property damage to legal costs and loss of stock. It allows businesses which suffer unforeseen problems to be able to continue operating.

There are a variety of different issues which insurance can protect you from:

Legal claims

Businesses can face a variety of legal issues that could lead to financial loss. Comprehensive business insurance ensures that whatever claim is brought, you will be able to cover any resulting costs.

Legal protection insurance covers your business in the case of legal disputes, such as investigations from the Health & Safety Executive, disputes with employees, and court costs.

Then there is protection, in the form of public liability insurance, if a member of the public, client or customer sues you because they claim they have been injured or had property damaged because of your business activities.

Professional indemnity insurance, meanwhile, covers professional negligence – in other words, mistakes you make while working for a client.

Insurance covers both the cost of defending a legal case and any compensation you might have to pay if you lose.

Contract disputes

Contract disputes can crop up in the world of business, and insurance has a crucial role in resolving such issues. Having the correct insurance policies can significantly impact the outcome of a dispute, potentially shifting the risk of loss from one party to another, covering you for any payments you may need to make due to damage or losses, and having an influence on settlement negotiations by encouraging other parties to settle earlier.

Ensuring your policy offers the correct protection can be particularly useful if you need to deal with a dispute without incurring significant upfront costs. Professional indemnity insurance will protect you from any mistakes you may make or accusations that you have failed to stick to a contract, while liability insurance covers damages, and a business interruption policy will provide you with protection against losses due to disruption to your work that may be caused by a contract dispute.

IR35 investigations

Initially introduced in 2000, IR35 – officially named as the off-payroll working rules – assesses whether a contractor is genuine or a disguised worker. The issue for businesses is that it is not always as easy as it sounds to make that distinction. There have been ongoing questions about the reliability and accuracy of the Government’s tool, CEST (Check Employment Status for Tax). This means leaving your IR35 status in the hands of CEST is a risk.

Insurance can provide protection against IR35 investigations and from the high costs that can come from them. It means your business can be covered for any additional taxes, interest or penalties that may come as a result of such an investigation.

Loss of work

If your business suffers a flood, fire or other natural disaster, or you are injured or ill, then insurance can cover you for any period you are unable to work. It can also help with expenses incurred in relocating your business or any other costs you may suffer until your business can get back to normal. Such cover can be a lifeline for a small business which would otherwise struggle during a period of extended downtime.

How can insurance give you more freedom or confidence as a business owner?

Knowing you are protected from unexpected problems means you can concentrate more fully on your core business, operating with increased confidence. This can lead to expansion into new markets or the development of technology and original products. Insurance acts as the safety net that enables businesses to make key decisions and to grow.

Such development can lead you to take on bigger clients, while having insurance will also give your company increased credibility. Potential clients are more likely to work with a business that is committed to responsible practices.

Business insurance can also be a prerequisite in some contracts. Without it, you might not be able to take on the work you need to expand and thrive. Even if insurance is not required for a specific piece of work, it shows your business is serious about protecting its assets and employees, and is therefore a more attractive proposition to partner with.

What’s the real cost of not being covered?

The cost of not having the right insurance can be extreme. If you suffer an accident or injury, then you may not be able to work. Without insurance, you would lose your income entirely, putting the future of your business at risk.

There are a number of unforeseen circumstances which could result in financial loss if you are not covered, from lost or stolen equipment, injuries suffered by staff members, damage to equipment or premises, or other legal claims. You can even insure yourself against loss of income if you have to spend time doing jury service.

Without employers’ liability insurance, which is a legal requirement for any business which employs people, you would not only be open to claims from staff who suffer harm while working for you, but you would also risk a hefty fine from the Health & Safety Executive.

Business owners can be fined £2,500 every day if they have staff but no employer’s liability insurance. A penalty of that magnitude can get very high, very quickly.

Failing to comply with IR35 requirements can also be extremely costly. Not only will you be liable for any unpaid employment taxes, but you will also face severe penalties. Even if HMRC deems you were merely ‘careless’ about your employment status, you will face a 30% penalty on unpaid taxes. That amount will jump to 70% if HMRC concludes you were aware your role was inside IR35 but you decided to act as if it wasn’t, and to a 100% penalty on unpaid taxes if you are found to have concealed your employment status to underpay tax.

It is worth noting that these penalties are subject to mitigation and can be reduced if a business discloses its non-compliance to HMRC, works with them to help resolve the situation, and allows HMRC access to records to ensure any errors are fully corrected.

What to consider when choosing a business insurance policy?

The type and scope of the business insurance you need to provide your company with a safety net against such risk will vary depending on your needs. Before taking out a policy, it is vital to examine what your company requires. Every industry comes with a unique set of risks, with those faced by a construction company being completely different from a marketing agency.

You should look to answer questions such as:

• Do you handle sensitive information?
• Does your business have physical locations that require protection?
• Do you employ anyone?
• Is there a high level of professional liability inherent in what you do?

When you take the time to recognise these needs, you are in a far better position to get the right insurance. You should always look to provide as much information as possible about the work you do and what you need to do it. Some standard policies don’t include cover for working at height or with heat, so you may need additional cover for such activities. Providing details of any safety measures, security or health and safety procedures you have in place can reduce the amount of your premium.

The next step is determining how much coverage you need. You will need to make sure your assets are fully protected, but not that you are over-insuring and spending money unnecessarily. Both tangible and intangible assets should be considered, from premises, machinery, vehicles and stock to intellectual property or your reputation. By evaluating the cost of replacing such assets, you can fix on a coverage level which matches that amount.

How Qdos Business Insurance can help

As business insurance specialists, Qdos can take the stress out of choosing the correct policy for your business. Their goal is to make sure the more than 100,000 freelancers, engagers, and contractors working inside ir35 they insure, as well as any business owners who contact them looking for effective cover, get the information they want, when they need it.

They have a wide range of policies and are experts in all things IR35, meaning that when it comes to constructing an insurance policy, they have the expertise and knowledge to protect your business. Book a call with Qdos or get a quote here.