Business insurance explained

Business insurance is one of those topics where the standard advice is "get everything, just in case", which usually means paying for cover you don't need. This is the honest version: what each main type of cover actually protects against, which businesses genuinely need which, roughly what it costs, and what you can safely skip for now. We don't sell insurance, so there's no incentive here to talk you into more than your work requires.

The quick answer: match cover to your actual work, not a generic list. Public liability matters if you deal with the public or work on-site. Professional indemnity matters if you give advice or provide a service a client could dispute. Employers' liability is a legal requirement the moment you hire anyone. Product liability matters if you sell physical goods.

Public liability insurance

This covers claims if a member of the public is injured, or their property is damaged, because of your business. If you ever meet clients in person, work on a client's site or premises, or run any kind of physical space customers visit, this is worth having, an accident on your watch can get expensive quickly.

If your entire business happens over email and video calls, with no physical interaction with customers or their property, the underlying risk is genuinely lower, and public liability may be less of a priority. Match it to whether your work actually brings you into physical contact with people or their property.

Professional indemnity insurance

This covers claims that your advice, your work, or a service you provided caused a client a financial loss. If you give advice, consultancy, design, or any service where a mistake or a disputed judgement could cost a client money, this is the cover that matters, and larger clients will sometimes contractually require you to hold it before they'll work with you.

For advice-led and service businesses, freelancers, consultants, agencies, IT specialists, coaches, professional indemnity is often the single most relevant policy, more so than public liability. It exists precisely for the "you told me to do X and it cost me money" scenario.

Employers' liability insurance

This one isn't optional. If you employ anyone, employers' liability insurance is a legal requirement in the UK, with penalties for not having it in place. It covers claims from employees who are injured or become ill because of their work. The key point for a new business is simply this: the day you take on your first employee, this stops being a choice and becomes a legal obligation, so factor it in before you hire, not after.

Product liability insurance

If you sell physical products, this covers claims that a product you sold was faulty or unsafe and caused injury or damage. For anyone selling physical goods, ecommerce, retail, manufacturing, this is a genuine consideration, because even a well-made product can occasionally fail, and the resulting claim lands on the seller. If you only sell services or digital products, it's generally not relevant.

What it typically costs

Cost varies enormously by trade, by the level of cover, and by your specific risk, so a single figure would be misleading. A low-risk, home-based service business might pay very little for basic cover, while a trade involving physical work, the public, or high-value client contracts can pay substantially more. The honest guidance is to get quotes for the specific cover your work actually needs, rather than either over-insuring against a generic checklist or assuming it'll be unaffordable. A broker conversation is usually free and will price your actual situation.

What you probably don't need yet

Plenty of new, low-risk, digital-first businesses need very little insurance on day one. Elaborate cyber cover, extensive product liability for a service business, or broad "all-risks" packages are often sold as essential when, for a specific business, they aren't. Don't let a general "just in case" instinct push you into cover that doesn't match your actual work. Start with what your specific risks genuinely call for, and add cover as the business, and its risks, grow.

Where to buy business insurance

There are three broad routes, and the right one depends on how straightforward your needs are. Direct from an insurer works well if you know exactly what you need and your situation is simple. Through a comparison site lets you quickly price standard covers across providers, useful for common policies like public liability. Through a broker is worth it when your situation is less standard, higher-value contracts, an unusual trade, or a mix of covers, because a broker assesses your actual risk and finds appropriate cover rather than leaving you to guess. Brokers are typically free to talk to, since they're paid by the insurer, so an early conversation costs you nothing and can stop you both over-insuring and under-insuring.

It's also worth knowing that many insurers offer combined policies that bundle several covers (say, public liability, professional indemnity and a few others) into one package aimed at a particular trade. These can be convenient and cost-effective, but check that the bundled cover actually matches your risks rather than assuming a package labelled for your industry is automatically the right fit.

How to actually decide

Work through it by asking what could realistically go wrong in your specific business, and who would be affected. Do you meet clients or the public? Public liability. Do you give advice or a service that could be disputed? Professional indemnity. Do you have staff? Employers' liability, and it's not optional. Do you sell physical products? Product liability. Once you've mapped the real risks in your work, the right cover is usually obvious, and anything beyond that mapped list is worth questioning before you pay for it.

If you're genuinely unsure, a broker will assess your specific situation for free and tell you plainly what applies, which is a better starting point than a generic online list.

FAQs

Is business insurance a legal requirement? Mostly no, with one important exception: employers' liability insurance is legally required the moment you employ anyone. Other types (public liability, professional indemnity, product liability) are optional in law, though some clients or contracts require them.

What insurance do freelancers need? Most commonly professional indemnity, since freelancers typically provide advice or services a client could dispute. Public liability matters too if you meet clients in person. Beyond that, match cover to your specific work.

What insurance do I need to hire my first employee? Employers' liability insurance is a legal requirement as soon as you have staff. Sort it before your first employee starts, not after.

Does insurance cost change by industry? Significantly. A home-based, low-risk service business pays very little, while trades involving physical work, the public, or high-value contracts pay more. Get quotes for your specific situation.

When should I get business insurance? Get the cover your work genuinely needs before you take your first client or customer (or hire your first employee), rather than after something goes wrong. For low-risk digital businesses, that may be very little; for higher-risk work, it's worth sorting early.