What insurance does a small business need?
The right insurance depends entirely on how your business operates — a consultant, a café and an electrician face different risks and need different cover. The starting point is to separate what's legally required, what's contractually required by clients or landlords, and what simply protects you from a bill that could sink the business.
Only one cover is required by law for most firms: employers' liability, if you have staff. Everything else is judged by exposure — who you deal with, what advice or products you supply, and what assets you'd struggle to replace.
Employers' liability: the legal one
If your business employs anyone — including part-time, temporary or some volunteer staff — employers' liability insurance is a legal requirement, with substantial daily fines for operating without it. It covers claims from employees injured or made ill through their work, and most policies provide £10m of cover as standard.
Genuinely sole-trader businesses with no staff are exempt, as are some family-only businesses — but the exemptions are narrow, so check before assuming.
Public liability
Public liability covers injury to third parties or damage to their property arising from your business — the customer who slips in your shop, the pipe you burst in a client's wall. It's not legally required, but for any business that meets the public or works on other people's premises it's effectively essential, and clients, councils and sites routinely demand £1m–£10m of cover before you can work. See our full public liability guide.
Professional indemnity
If clients rely on your advice, designs or professional services, professional indemnity covers claims that your work caused them financial loss — including the legal costs of defending a claim that goes nowhere. It's mandatory in many regulated professions and a standard contract condition for consultants and contractors. Our professional indemnity guide covers how much to carry.
Premises, contents, stock and interruption
Premises-based businesses should insure the building (if owned), contents, equipment and stock against fire, flood and theft. The cover that's most often missed is business interruption — replacing lost income while you can't trade after an insured event. A fire that closes you for four months usually costs more in lost revenue than in damaged kit; see the business interruption guide.
Combined policies: buying it as a package
Most small firms don't buy six policies — they buy a combined business policy bundling liability, contents, stock and interruption in one. It's usually cheaper and simpler than separate policies, and add-ons like tools cover, cyber or goods-in-transit can be bolted on where your risks justify them. The art is matching the bundle to your actual exposures rather than paying for cover you'll never use — see best insurance for small businesses.
Getting the right cover at the right price
Before buying, list your real exposures: staff (employers' liability — required), public contact (public liability), advice (professional indemnity), premises and kit (contents/interruption), and anything sector-specific. Then match limits to what contracts demand and what a worst-case claim would actually cost.
A specialist broker will do this mapping with you and price it across insurers. Find a business insurance specialist through Nesto — free, no obligation.