Limited Company Insurance
A limited company has a separate legal entity. The shareholders only have to pay off debts of equal amount to the value they invested and not beyond, proposing the idea that they have limited liability. Furthermore, selling shares to stockholders can generate a lot of money and hence these businesses thrive financially, boosting their image.
The partition between the company and the shareholders magnifies how appealing limited companies are safety-wise and how they often dominate due to their large size. However, that is not to say that they come without risk. Insurance is a solution to this, as any debt incurred is covered by it. In the United Kingdom, only Employers’ Liability Insurance is mandatory. However, several other covers should be considered.
Types of Limited Company Insurance
Employers’ liability insurance is the only compulsory cover that businesses in the UK must have in response to the Employers’ Liability Act 1969. Therefore, not having this insurance is a punishable offence that is a violation of the law; the only exception to this rule is limited companies that have only one shareholder who owns more than half of the company’s shares.
For example, if an employee slips on the wet floor at work and consequently fractures their leg, they may decide to sue the employer in a lawsuit and file a claim that it was the company’s fault. When the company is insured, the legal fees of hiring a lawyer are covered even if the claim is lost, and the employee’s medical treatment will be covered up until the maximum amount of the insurance policy. Whilst the employee is resting. The insurance company will also pay their salary, so both the business and its workers are compensated accordingly.
Public liability insurance protects the business when a third party (clients) claim to have been harmed by the company in the form of bodily injury or damage to their property. Depending on the line of work, it is of utmost importance to have this safety as it is very likely to encounter a dissatisfied client. Moreover, accidents are inevitable and especially in businesses that provide services in the homes of a customer. There is a much higher chance of inadvertent harm.
For instance, interior design businesses often require employees to visit customers’ houses and show them patterns and materials. If they accidentally break a possession belonging to the customer, the insurance will cover the legal fees and recompensate for the possession.
Professional indemnity insurance is vital for businesses that handle private matters of clients like sensitive information or consult them in making decisions. This type of insurance means that if the third party files a claim of negligence on the company’s part, there has been a breach in confidentiality, their sensitive information is lost or stolen, or their name has been slandered, the insurance policy will cover the losses.
If, for example, an architect makes a mathematical error and the ideas for a structure they proposed to end up not functioning as they should, this is a human error but still counts as negligence and will be covered. The cost of the construction will be paid back to the client by the insurance company. Likewise, suppose an advertising business produces a campaign for a client that had included the wrong contact information. In that case, they can be sued for negligence, but the insurance company would compensate for the fees.
Product liability insurance is another hugely popular and critical cover. Over 56,000 claims were filed in the last year, magnifying how beneficial it is to have a safety net and protect your business from financial loss, which would be devastating without the insurance money.
Product liability insurance reimburses the third party for products bought in a defective state and the harm they consequently cause. This primarily benefits retail businesses as things can go wrong in product manufacturing that is not detected and, as a result, can cause harm.
Fake tan firms are one of the most successful in the cosmetic division, with the self-tan industry valued at over £1 billion. If a client was to purchase a self-tan product and use it, and the colour turns green and does not wash off, this is a product malfunction, and the client could sue the company director. The product liability insurance would cover the cost of the procedure to remove the tan and the legal fees associated with the claim.
Business car insurance is imperative for companies where employee’s use the company car to drive to meetings or get to clients. Especially in real estate, a worker needs to drive to the house that the clients are viewing, and often this is done during the workday at peak hours where there is lots of traffic.
Due to this, car accidents are in danger of occurring as the vehicle could crash into objects or each other. If the business has insurance, the cost of covering the vehicle’s repair is paid for, and a lot of money is saved as this can be incredibly costly. Depending on the car and the number of people using it, the insurance price can vary; however, it is worthwhile when the long-term future is considered, and the risk factor is considered.
To summarise – Limited Company Insurance
Overall, limited company businesses are urged to get insurance even though the shareholders do not have to pay any excess over the value of capital invested if a debt is paid. With no insurance, a business is at high risk of closing as the costs concerning legal fees, customer compensation and car repairment can be inordinate and cause business failure.
Insurance price varies on the claims history, amount of employees, demographic factors and many more; whilst the need for insurance may seem unwarranted, the future cannot be controlled, and accidents can happen to any business at any time. Generally speaking, businesses can have a lot of claims filed against them, which adds up, so the monthly cost of insurance is minimal compared to the debt that may be incurred.
Find out more about the type of insurance you need as a limited company here.
Other useful links about business insurance:
Business Contents Insurance
Business Building Insurance
Employers’ Liability Insurance
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