You can't insure against failure, but there are insurance policies for almost every other eventuality from accidentally killing a customer to a supplier accidentally killing you. How do you decide which risks you can live with, and what cover you can't live without?
WHAT'S COMPULSORY? Under UK law, you must have employers' liability cover; you also need third party insurance on any vehicles you put on the road.
THINK ARMAGEDDON. 'First think of those risks which would wipe out your business,' says Joe Clowes, regional chief executive for broker Marsh.
'For example, if you are a sole proprietor and you are sued for professional malpractice, that would take you out altogether.' Ditto if you're a casino operator and you lose your gaming licence. Covering these risks should be top priority.
CONSIDER A PACKAGE. Most commercial insurers offer a small-business package, which covers a number of the main risks, such as employer's liability, buildings and contents (including stock), cash, public liability, and computer breakdown. It should be more cost-effective, and it also reduces the possibility of your claim falling between two different policies.
Premiums vary wildly, depending on the nature of the business and its assets.
CONSULT AN EXPERT. If your business is specialised, you may need a broker who really understands the risks. They should know which underwriters have previous experience of claims in this area and can provide sound cover. Shop around for the best quote.
DON'T BE INTERRUPTED. Business interruption insurance will cover the cost of setting up at a new location and any consequential loss, in the event of fire, flood or pestilence. But according to Jane Davies of the Forum for Private Business, it has added value. 'The insurer will act far more quickly to process your claim, because it's costing them money to keep your business going,' she says. 'Otherwise they could take months.'
READ THE SMALL PRINT. One of the most common mistakes, says Davies, is failing to adhere to conditions set out by the insurer. Non compliance may render a claim null and void. Taking steps to improve safety and security can also lower your premiums.
PLAN FOR DISASTER. Insurance can only do so much, and it's far better to avoid any loss in the first place. You should draw up a 'disaster recovery plan', says Suzanne Moore of the Association of British Insurers. 'A lot of new businesses never get going again after a fire,' she explains, 'especially if all their contact books of suppliers and customers are lost. At the very least, you need a back-up of all your information.'
WHO'S KEY? 'Key person' insurance covers the business against losing key individuals because of death, illness or injury. Don't allow vanity to guide your decision though. 'Key person cover is only necessary if the business is dependent upon that individual, and they cannot be replaced,' says Clowes. 'It may be the third man down who is really the key, for instance a designer in a design studio who brings in all the business.' You can also insure a key client, against the eventuality that they drop dead and you lose their business.
'Key person insurance starts at around £140 a month, to provide £500,000 cover for a non-smoker in their mid-thirties against death or critical illness,' says Hugh Brumfitt of Leeds-based specialist NMA Financial Management.
PROTECT YOUR IP. You can't insure against competition, but you can insure against unfair infringement of your intellectual property such as brand names, designs and patents.
DO SAY: 'What can we do to reduce our risks - and premiums?'
DON'T SAY: 'If I bought every insurance policy going I'd be insolvent.
So I don't bother with any of them.'.