Do I Need Shop Insurance?

20/06/2013 -- Mary Simpson
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Commercial and retail shop insurance comprises a number of policy options including:

Do I Need...

  • Employers Liability Insurance
  • Public Liability Insurance
  • Products Liability insurance
  • Buildings Insurance
  • Contents Insurance
  • Business Interruption Insurance
  • Money Insurance
  • Books Debt Insurance
  • Trade Credit Insurance
  • Engineering Insurance
  • Glass and Sign Insurance
  • Legal Expenses Insurance

Do Shops Need Employers Liability Insurance?

Employer liability insurance is compulsory under The Employers Liability (Compulsory Insurance) Act 1969 if you employ anyone outside your immediate family unless the family business is a limited company. It covers you against claims from staff who fall ill, are injured or die as a result of their work. The premium is based on the number of staff you employ.

Failure to meet the requirements of The Employers' Liability (Compulsory Insurance) Act 1969 can result in a daily fine of up to £2,500.

The minimum cover for employers' liability insurance is £5m, but most insurers provide cover up to £10m.

The cost of employer liability insurance depends on the type of business you're in, and the number of people employed.

You can reduce premiums by carrying out a regular risk assessment of the business, having a clear health and safety policy and making sure equipment is regularly serviced.

More information >> Do I Need Employers Liability Insurance?

Do Shops Need Public Liability Insurance?

If the general public injure themselves as a result of your negligence (eg break an ankle on a wet floor), or property is damaged because of your business operations, you could be sued for millions. Public Liability Insurance covers this type of claim and usually any legal expenses involved.

More information >> Do Shops Need Public Liability Insurance?

Do Shops Need Product Liability insurance?

Whether it's a Hoover, lawnmower, computer or electrical equipment, if you make, repair or sell products, you could be sued for damage or injury caused by defects in their design or manufacture - even if it's not your fault.

Under the Consumer Protection Act 1987, it's a criminal offence to supply defective consumer goods.

The cost to recall products and goods can be massive - product recall insurance can be bought separately to cover you for expensive product recall notices, thus reducing exposure to potential product liability claims.

The standard level of cover is £2m, but you can increase this.

More information >> Do I Need Products Liability Insurance?

Do Shops Need Buildings Insurance?

If your shop premises are owned by you, you need buildings insurance to cover the cost of the full rebuilding of your business premises - not just the market value - if disaster strikes.

You should also cover the cost of professional fees (eg architect, surveyor) and the cost of demolition and site clearance. The premium is based on the value of the property.

Standard cover protects against fire, lightning and explosion of domestic gas and boilers but a more comprehensive option is "all risks" to include accidental damage or loss not specifically excluded in a standard policy.

So - depending on your attitude to risk and your location - you may want to cover your business property for explosion, riot, malicious damage, storm, flood, impact by aircraft, road and rail vehicles, escape of water from tanks or pipes and sprinkler leakage.

If you lease the premises, then the owners are responsible. You have every right to check their buildings insurance policy to ensure it's adequate.

The cost of the insurance depends on several factors - type and age of building, distance from emergency services (eg fire brigade), your attitude to risk management and any previous claims' history.

Do Shops Need Contents Insurance?

What if your contents were flooded or caught fire? You could be left with nothing. It's wise to insure valuable contents such as stock, furniture, fixtures and fittings and equipment separately from the building to give extra cover.

Insure your stock for its cost price with no mark-up. You can increase the sum insured - eg by 25% or 50% - to cover higher levels of stock held during busy trading times, eg Christmastime/Easter.

Check that there's also cover for property in transit and at exhibitions.

You can insure plant or business equipment on a new for old indemnity basis, or depreciation (ie wear and tear is taken into account when settling claims).

Do Shops Need Business Interruption Insurance?

Top Tip

Don't confuse Business Interruption insurance with Buildings and Contents cover.

Sometimes called Property insurance, Buildings and Contents cover will meet the cost of repairing damage to a building or replacing stolen or damaged equipment and stock.

It won't cover you for loss of business income or pay any of the outgoings needed to sort the problem.

If the damage is serious it will take time to get the business back to normal.

Without Business Interruption cover, your business could face financial difficulties.

Standard Business Interruption insurance covers the risk of fire, lightning, explosion and hazards such as storm, flood, malicious damage and theft.

You can claim if any of these insured risks occur at your shop and affect turnover.

But what if one of these risks strike at your suppliers' premises, or your customers or public utility providers (eg water, gas, electricity, telecoms)?

The effect on your business could be horrendous. You can extend cover to include this.

Retail catering businesses should also think about covering loss of income due to closure following:

  • notifiable disease
  • food poisoning
  • pest infestation
  • substandard sanitation

Retailers can even insure business against the damaging effects of murder or suicide on the premises. In a high crime area, it makes sense.

Some insurers will also cover loss of business income as a result of:

  • bomb scares
  • oil or chemical pollution
  • damage at a local attraction (eg leisure centre or shopping complex)

According to AXA, 80% of businesses go bankrupt after a serious fire, which is why they offer Business Interruption cover as standard.

Also known as Loss of Profits or Consequential Loss, this compensates you for loss of turnover or damage to your property that stops you from trading eg, a fire, theft or flood, or closure following an outbreak of food poisoning.

Business interruption cover can be a lifeline for your business because it can pay things like rent and wages for employees that remain and redundancy payments to staff you have to let go.

You can also cover loss of income and meet extra costs such as accountants' fees, cleaning costs and hiring temporary premises.

You can opt for a one or three-year term policy, but it's harder to prove loss of earnings over a 1-year period. The premium is based on an estimate of your gross annual profit.

The duration of the cover - maximum indemnity period in insurance speak - is usually a year or more and will tide you over until you can trade at the same level as before the incident.

Business interruption cover really does make sense and is one of the most valuable types of insurance to buy.

If your business couldn't operate without specific property or equipment, then you need it.

Do Shops Need Money Insurance?

If you keep cash on the premises, you need to insure it against theft. You can add on theft by an employee, sometimes called Fidelity Guarantee or Employee Dishonesty.

Cover should include what insurers describe as 'non-negotiable' money - crossed cheques, bankers drafts, postal orders etc, unused units in franking machines and credit company sales vouchers.

Make sure business money is covered during transit (eg when taking money to or from the bank) and that there's cover for bodily injury to you/your employees following an assault or attempted assault.

Do Shops Need Books Debt insurance?

To protect your business against loss of money following theft of books of account or their accidental damage in a fire or flood, say. This covers the cost of working out how much customers owe and the amount of any unpaid debts that can't be tracked down because of loss/damage to your accounts.

Do Shops Need Trade Credit Insurance?

What if one of your biggest customers went bankrupt or delayed paying their bills? Your cashflow could dry up. Trade Credit insurance covers against the risk of bad debts and gives you working capital to reduce the blow.

This type of insurance is popular with exporters. Many insurers provide support services in the shape of credit assessment /debt collection management.

Do Shops Need Engineering Insurance?

Sudden mechanical or electrical breakdown of machinery, including computer equipment, could spell ruin. This type of cover will help meet the costs of repair/replacement/data restoration.

Mechanical equipment such as lifts and lifting machinery, boilers, etc., must be regularly maintained and inspected. If not the policy will be void.

Do Shops Need Glass and Sign Insurance?

This type of insurance meets the cost of replacing expensive glass or signage due to accidental or malicious damage.  It's not always covered under standard premises insurance policies. Always look at the small print, especially the excess you have to pay if you do need to claim.

Do Shops Need Legal Expenses Insurance?

If you employ staff there is every possibility you could find yourself being taken to court over employment matters such as a claim for unfair dismissal or racial or sexual discrimination.

Or you may want to take out court action to recover bad debts, resolve a dispute with your landlord, or appeal against a loss of liquor license.

But taking out - or defending - a legal action can cost a small fortune and place huge financial strain on a business.

Legal expenses insurance will pay for legal costs such as solicitors' fees and expenses, the cost of barristers, court costs and opponent's costs if the judgement goes against you in civil cases.

The policy should also cover the cost of employing accountants and lawyers to defend your rights (eg if your business is under investigation for tax or VAT).

Do I Need Goods in Transit insurance?

You'll want to cover goods against loss or damage while in your vehicle or when being sent via carrier. The insured sum may be limited for each vehicle or consignment. Check that the limit is adequate.