This page:
The Price Survey
The list on this web site represents the
results of a survey of business insurance quotes gathered from UK
insurers and intermediaries operating online. The results are ranked
with the overall cheapest first. Remember that you are unique! What
is cheaper for someone else may not be the cheapest for you.
We list many of the business insurance providers you might want
to visit to compare the business insurance quotes they give. Some
of the sites are sponsored. We do not endorse any of the business
insurance providers we list and encourage you to shop around for
the best business insurance for you; please
read our disclaimer.
Business Insurance
There are many different types of business insurance available
- but which ones do you need to have, which should you have, and
which don't you need at all?
Choose an insurance adviser and present your risk
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Introduction
As a business owner and/or employer you will probably use two types
of insurance adviser.
General and commercial risk insurances are dealt with by an insurance
broker. You will need to identify the type of insurance you need
so that you can find a suitable broker for your business.
Life assurance, protection and health insurance are dealt with
by independent financial advisers (IFAs). Insurance brokers and
IFAs act as intermediaries between you and an insurance company.
Alternatively, you can contact insurance companies directly, but
you might find it easier to use an insurance broker or IFA.
This guide explains the issues involved in choosing both types
of adviser and how to present your risk details.
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Minimise your risks - and your costs
There are a number of measures you can take to minimise your risks
and keep your costs low.
Managing risks in your workplace can make it easier to obtain insurance,
but it also makes good business sense. It can reduce costs that
insurance does not cover including your insurance excess and the
cost of replacing staff, giving sick pay, bad publicity, inconvenience
and fines.
You should have effective health and safety policies and procedures
in place to help ensure a safe working environment. You can download
a guide to the five steps to risk assessment from the Health &
Safety Executive (HSE) website.
You can also use our interactive health and safety performance
indicator tool to find out how well you're managing your health
and safety.
You can minimise other business risks by ensuring that equipment
and machinery is safe and in good repair and that you have all the
necessary quality certification and licences. The use of best materials
and equipment, ideally environmentally friendly and non-hazardous,
will help to reduce risk.
Training staff to follow correct health and safety procedures will
also help to prevent accidents. Encourage your employees to have
regular health checks and to use their full holiday entitlement
to help reduce stress.
Your previous insurance claims record may in part determine the
size of the premiums you pay. In other words, if you have submitted
a claim or claims in the past this may be reflected in the size
of the premium the insurance company quotes.
It is essential to keep detailed records of accidents, risk assessments
and equipment purchases, as insurance companies require documentary
evidence if you do submit a claim. The clearer your records, the
more likely it is that your claim will be accepted without difficulty.
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Presenting your risk details
A comprehensive risk assessment is the first step to compiling
a presentation of your risks.
Assess your risks
With the assistance of your insurance broker you should carefully
assess your insurance requirements and compile a thorough report
of the condition of the business. For more information, see our
guide on risk assessment - an overview.
A good presentation of your risk details with all the required
information and evidence of good practices will help the insurance
company to make the right decision about how much of a risk your
business is and how much premium to charge.
It is the job of your insurance broker to help you present the
risk. It is also their job to obtain comparative quotes from different
insurance companies.
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Specialist insurance
Your broker should also identify whether you will need to take
out specialist insurance for your type of business. There are many
types of commercial insurance you may wish to consider. For more
information, see the page on identifying risks and insuring against
them in our guide on how to insure your business - people, life
and health.
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Minimise your risks
You are more likely to get cover if you can demonstrate that you
have had few or no accidents in your business and that the business
takes safety seriously, with detailed risk-assessment records and
comprehensive training practices.
This is especially important for high-risk businesses, such as
those that undertake more dangerous activities such as working at
height or with dangerous substances.
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Where to get advice on choosing a broker
Most business owners prefer to use an insurance broker for general
and commercial insurance. To get the best value and most appropriate
insurance to protect your business your choice of broker is important.
An insurance broker will help identify and present your risks,
suggest improvements for business continuity, obtain quotes from
insurance companies and assist you in making claims.
Ask questions to ensure the broker will be able to support your
business, such as:
- Will they provide help and support when you make a claim?
- Can they find the most appropriate cover for your business needs?
- What experience do they have in your business sector and of
the risks that your type of business faces?
- What recommendations or references can they offer that show
they can help you?
Many insurance brokers offer a general service but some also provide
specialist advice on particular business areas such as marine and
aviation insurance.
Your business could have specialised risks such as working with
hazardous substances. Some industries have trade insurance schemes,
agreed with an insurer and tailored to the needs of that industry.
A specialist broker can also help to prepare your presentation
to send to insurers. If they understand your business needs they
are more likely to know the most relevant insurers to approach.
Some brokers charge a fee for their services, but most obtain a
payment from the insurance company they recommend to you if you
take out insurance with that company.
There are many places to get help when choosing a broker including:
- Personal recommendations
- Industry bodies or associations
- Insurance industry associations
- The internet
Your local Business Link and Chamber of Commerce are invaluable
sources of advice in selecting a broker or an independent financial
adviser. You can also find a broker on the British Insurance Brokers'
Association (BIBA) website - Opens in a new window or select a broker
on the Institute of Insurance Brokers (IIB) website - Opens in a
new window or contact the IIB Enquiry Line on Tel 01933 410 003.
If you choose to deal directly with an insurer, it's worthwhile
checking that they are a member of the Association of British Insurers
(ABI). Check that an insurer is a member of the ABI on the ABI website.
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Manage the relationship with your insurance adviser
It's best to establish clear parameters in your relationship with
your insurance adviser. You should be clear about what your adviser
can, and cannot, do for you. Discuss what you require for your business
and make sure they are prepared to offer this level of service.
When to get in touch
Your needs will define the level and frequency of contact with the
adviser. You will probably see them often in the early stages of
the relationship, but once your insurance needs have been met and
the policies are in operation, contact will probably become less
frequent.
Maintain regular contact
You should maintain regular contact with your adviser. Circumstances
can change, eg if your business expands or contracts, and this may
alter your insurance requirements. You should always keep your adviser
informed of changes to the business as this may affect or even invalidate
your policies.
Review your needs
It is sensible to review performance and cost regularly. There is
no shortage of advisers and, however friendly your current adviser
may be, you should consider switching if you are not getting value
for money. Equally, there is little incentive for change if you
are satisfied with the quality of service and cost.
Get quotes
For general insurances, which are usually renewed annually, it's
always a good idea to get a few comparative quotes at renewal time.
You are recommended to start the renewal process as early as possible.
You may ask your broker to do so, as the insurance market is competitive
and brokers normally compete for business.
For investments and pensions it is sensible to ask your independent
financial adviser to conduct periodic performance reviews and to
check that the original assumptions, eg retirement age or market
performance, are still valid or appropriate.
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Where to go if you have problems with your broker or insurer
The Financial Ombudsman Service (FOS) is an independent service
set up to help settle individual disputes between consumers and
financial companies. The service is confidential and free to consumers,
but you must complain to the company first before the FOS can look
at your case. If you are unable to resolve your grievance with the
company directly, then you should seek advice from the FOS.
Find out how to make a complaint to a financial company on the
FOS website. - Opens in a new window
You do not have to accept any decision the FOS makes but if you
do accept an ombudsman's decision, it is binding on both you and
the company.
The Financial Services Authority (FSA) is an independent body that
regulates the financial services industry in the UK, including insurance.
You can read a step-by-step guide to making complaints about financial
services on the FSA website.
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Insure your business and assets - general insurances
Introduction
Insurance can protect your business against damage to, or the loss
of, physical assets. The cost of insurance depends on both the insurer's
assessment of the likelihood of damage and the size of any payment
they may have to pay in the event of a claim.
This guide provides information on the different types of general
and commercial insurances available and how to assess what types
of insurance you need.
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Insuring your business premises
If you have business premises, taking out a suitable insurance
policy will ensure you are covered for damage from a variety of
causes. While you should check the policy details carefully, most
standard contracts will insure your buildings and premises for a
range of risks including:
- Fire and lightning
- Explosion
- Not
- Malicious damage
- Storms
- Floods
- Damage caused by vehicles
If you are a tenant, ask your landlord who is responsible for insuring
the premises. Normally this is the landlord. The tenant, however,
is usually responsible for shop fronts.
If your lease complies with the Code for Leasing Business Premises
in England and Wales 2007, and your landlord insures the property,
the insurance should be fair and reasonable, and represent value
for money. Your landlord must disclose details of any commission
they receive and provide insurance details on request. You can download
a copy of the code from the Leasing Business Premises website.
If you are responsible for insuring the property, you could opt
for 'all risk' insurance. This provides coverage against any other
damage or loss specified in the policy, including accidental damage.
Insurance policies do not cover:
- Wear and tear
- Electrical or mechanical breakdown
- Any gradual deterioration specified in the policy
You should notify your insurer if your premises are left unoccupied
for any length of time. Cover is likely to be reduced to fire only
and may not include malicious damage caused by vandalism.
You need to insure your business premises for the full rebuilding
cost, known as reinstatement, rather than just the market value.
You will only be able to claim the cost of what you have insured,
regardless of the amount of damage.
A chartered surveyor will be able to help you to calculate the
reinstatement value. You can select a qualified chartered surveyor
through the Royal Institution of Chartered Surveyors (RICS) website.
To decide on the appropriate level of cover you should seek professional
advice from a regulated insurance company or broker. Insurance brokers,
advisers and other insurance intermediaries are regulated by the
Financial Services Authority (FSA). You can check that your adviser
is regulated by the FSA on the FSA website.
If you choose to deal directly with an insurer, it's worthwhile
checking that they are a member of the Association of British Insurers
(ABI). Check that an insurer is a member of the ABI at the ABI website.
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Contents insurance
Premises insurance only covers the physical building, so you will
also need separate insurance cover for stock, machinery and contents.
You have the choice of either replacement as new insurance or indemnity
insurance.
Many business owners choose indemnity cover, which deducts the
cost of any wear and tear when settling a claim. Contents are also
covered against theft, providing there has been forcible and violent
entry to, or exit from, the premises. See our guide on security
and crime prevention.
You can also choose a business interruption policy that insures
against loss of profit and higher overheads resulting, for example,
from damaged machinery.
To decide on the appropriate level of cover it's a good idea to
seek professional advice from a regulated insurance company or broker.
Insurance brokers, advisers and other insurance intermediaries are
regulated by the Financial Services Authority (FSA) and you should
make sure that your adviser has FSA authorisation. Check that an
insurance broker is regulated by the FSA on the FSA website.
You can select an insurance broker through the Institute of Insurance
Brokers (IIB) website - Opens in a new window, or contact the IIB
Enquiry Line on Tel 01933 410 003. You can also select a broker
through the British Insurance Brokers' Association (BIBA) website.
If you purchase products or services from insurance intermediaries,
you have the right to ask the intermediary how much commission they
receive for selling the product or service to you.
If you choose to deal directly with an insurer, it's worthwhile
checking that they are a member of the Association of British Insurers
(ABI). Check that an insurer is a member of the ABI at the ABI website.
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Specialist insurance
Depending on the type of business you run, it may be prudent to
take out specialist insurance for your business assets.
There are many types of commercial insurance you may wish to consider:
- Loss of cash insurance - provides cover to an agreed limit for
the loss of money, whether in transit or from business premises.
- Goods in transit insurance - covers goods against damage while
being moved.
- Travel insurance - essential if you or your employees travel
abroad. Ensure that you are covered for working abroad as well
as travelling, if necessary. See our guide on how to insure your
business - people, life and health.
- Commercial legal insurance - covers legal expenses that may
arise out of a change in legislation or penalties resulting from
non-compliance.
- Credit insurance - insures you against debtors who are unable
to pay you as a result of bankruptcy. See our guide on debt factoring
and invoice discounting: the basics.
- Engineering insurance - provides specialist cover for machinery,
including computers. By law, some types of machinery must be inspected
regularly. An insurer will be able to tell you if this applies
to your business and will often arrange these visits. To insure
off-site machinery, you will need to purchase all risks cover.
- Glass insurance - covers the replacement of glass following
malicious or accidental damage.
Professional indemnity insurance - covers you against compensation
claims if you have been negligent, resulting in damage to a client.
- Data processing insurance - provides cover for electronic media
and electronic data processing equipment.
- A fidelity guarantee - insures against any loss of money or
stock as a result of staff dishonesty, such as theft.
Tradesman's tools can often be added to a liability package. See
our guide on liability insurance.
You can select a broker through the British Insurance Brokers' Association
(BIBA) website - Opens in a new window or select a broker through
the Institute of Insurance Brokers (IIB) website. If you choose
to deal directly with an insurer, it's worthwhile checking that
they are a member of the Association of British Insurers (ABI).
Check that an insurer is a member of the ABI at the ABI website.
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Motor insurance
By law any vehicle used on the road or other public place must
be covered by a motor insurance policy. If you, your employees or
anyone else working for your business uses a vehicle for work then
you should check that:
- All vehicles owned by your business are covered by appropriate
insurance
- Any employees' vehicles used for or in connection with business
have their insurance extended to
- Cover use for their employer's business
- Any personal vehicle insurance that you may have covers business
use
You should also make sure that the cover provided by the policy
is appropriate as there are different classes of business use. For
example, travelling sales people or commercial representatives are
considered differently from those making only occasional business
trips.
If you own several vehicles you may be able to get fleet cover
that might offer better terms. Your insurance broker will be able
to advise you on this.
You need to check the licences of all your drivers and advise your
insurers of any motoring convictions. Otherwise, you will not be
insured. You will also need to tell insurers of any motor convictions
that happen after insurance is in place.
You should consult an insurance broker about which types of insurance
best meet your business' needs. You can select an insurance broker
through the Institute of Insurance Brokers (IIB) website - Opens
in a new window, or contact the IIB Enquiry Line on Tel 01933 410
003. You can also select a broker through the British Insurance
Brokers' Association (BIBA) website. If you choose to deal directly
with an insurer, it's worthwhile checking that they are a member
of the Association of British Insurers (ABI). Check that an insurer
is a member of the ABI at the ABI website.
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Business insurance if you work from home
If you work from home, you may need a specialist insurance policy.
Household insurance will not cover any loss of office equipment,
nor will it provide public liability cover.
Your standard household insurance may even be invalid if you work
from home, although most household policies can be extended to cover
this. Similarly, you should check the terms and conditions of your
mortgage, as lenders often require to be informed if you use your
home to operate a business.
Consult your insurance broker about which policy would best suit
your business needs and which will evolve with your business as
it develops. You can select an insurance broker through the Institute
of Insurance Brokers (IIB) website - Opens in a new window, or contact
the IIB Enquiry Line on Tel 01933 410 003. You can also select a
broker through the British Insurance Brokers' Association (BIBA)
website. If you choose to deal directly with an insurer, it's worthwhile
checking that they are a member of the Association of British Insurers
(ABI). Check that an insurer is a member of the ABI at the ABI website.
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Getting the right insurance cover
Few business owners deal directly with insurers. Most prefer to
go through an insurance broker for impartial insurance advice.
They can advise you on whether a single policy or a combination
of single policies would be more appropriate. Be sure to give all
relevant information to the insurer, otherwise a policy may not
be valid.
You can select a broker through the British Insurance Brokers'
Association (BIBA) website. You can also select an insurance broker
through the Institute of Insurance Brokers (IIB) website - Opens
in a new window, or contact the IIB Enquiry Line on Tel 01933 410
003.
Insurance brokers, advisers and other insurance intermediaries
are regulated by the Financial Services Authority (FSA) and you
should make sure that your adviser has FSA authorisation. Check
that an insurance broker is regulated by the FSA on the FSA website.
If you purchase products or services from insurance intermediaries,
you have the right to ask the intermediary how much commission they
receive for selling the product or service to you.
If you do choose to deal directly with an insurer, it's worthwhile
checking that they are a member of the Association of British Insurers
(ABI). Check that an insurer is a member of the ABI at the ABI website.
Lloyd's underwriters are not represented by ABI. Lloyd's underwriters
information on the Lloyd's website.
When buying insurance, it is useful to:
- Get quotes from several different insurers or ask your broker
to do so
- Compare the levels of cover
- Talk to your broker about whether you need a policy tailored
to your specific needs
Other factors to take into account when choosing a policy are:
- What it will cover
- Service
- Cost
- Whether there is a no claims bonus
- Whether the insurer offers 24-hour legal advice and emergency
helplines
- The level of excess - the amount of each claim that you will
have to pay yourself
- The extent of excess to be retained by your business
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Making an insurance claim
As soon as you discover loss or damage to your assets, you need
to report it to your insurance provider. If you think that the loss
or damage is due to a criminal act, you should report it to the
police immediately. You should write down as many details as possible
about what happened and when.
You will also need to provide:
- Estimates for repairs
- Proof of the cost of any emergency repairs that were required,
eg to make equipment or premises secure
- Proof of ownership
- The cost of the items you are claiming for, with valuations
and/or receipts
- A police crime reference number, if you think that your business
has been the victim of a crime
any damaged assets for inspection
If you need to make emergency repairs, do so and advise your insurers
of what you have done. If possible, advise insurers before going
ahead, but it is most important that you prevent further damage
that might increase the claim.
For large or complicated claims, the insurance company will often
employ a loss adjuster. They will inspect the damage and check claims
for quantity, description and pricing. Loss adjusters are impartial
experts who can advise both the insurer and the policyholder.
They can also advise you on:
how to improve security and safety
areas of cover you may have overlooked
repair techniques and specialist companies who can undertake such
work
You could employ a loss assessor who will negotiate and settle the
claim on your behalf. However, since they will charge a fee, it
is usually only worth considering if you are likely to make a substantial
claim.
Loss assessor contact information on the IPLA website.
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Reducing the risk to cut premiums
Insurance can be expensive, but there are ways of reducing your
company's risk and, as a result, your insurance premiums. One important
way to do this is to ensure your health and safety record is good.
You can do this by:
- Conducting a safety and risk audit - see our guide on risk assessment
- an overview
- Demonstrating a clear health and safety policy with properly
documented procedures
- Regularly servicing equipment
- Assessing how well you're managing your health and safety hazards
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Insure your business - people, life and health
If you or your employees suffer an injury, illness or death, there
could be serious financial consequences for you, your business or
your employees.
Insurance can either provide protection for the business itself,
eg to make up any shortfall in profits should the business lose
a key employee, or it can be an important benefit for employees,
thereby helping you recruit and retain the right people.
This guide provides an overview of the different types of insurance
and the ways in which different policies can benefit your business.
If you are thinking about buying insurance protection, it is always
a good idea to get expert help from an independent financial adviser.
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Identifying risks and insuring against them
In order to decide on the type of insurance, first identify the
risks facing your business and employees.
Certain types of insurance are compulsory for any business and
some are required if your business is involved in a particular type
of activity or way of operating. Some of the most common types of
required business insurance are:
employers' liability - although you don't need this if you own
the business and you're its sole employee
motor insurance
Make sure that your liability insurance is fully up to date. If
someone successfully claims personal injury compensation against
you, the NHS can now recover charges for treatment (including ambulance
costs). This applies to incidents that occurred either on or after
29 January 2007. You can download a guide on the Employers' Liability
(Compulsory Insurance) Act 1969 from the Health & Safety Executive
(HSE) website
Other insurance will insure your employees.
Consider cover for:
- Group life
- Personal accident
- Travel
- Permanent health
- Private medical
It's important to prepare your business to survive major disruption
and to re-establish normal operations as soon as possible after
a problem occurs. An effective health and safety policy can help
prevent accidents, and a procedure for data backup will enable you
to cope with a computer breakdown.
However, there will be events that inevitably are out of your control.
In these cases, you may find that having the right insurance cover
can minimise disruption to your business. For example, you can obtain
insurance to help you cope with an unexpected event to one of your
key employees, such as illness, retirement or death. Among the types
of insurance to consider are:
- fidelity guarantee against loss as a result of staff dishonesty,
such as theft
- professional indemnity insurance
- accident and sickness
- key personnel
- income protection
- critical illness
- private medical insurance
- loss of profits
You should also think about insuring your business and its assets.
See our guide on how to insure your business and assets - general
insurances.
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Basic types of life and health insurance
Life insurance pays out either a lump sum or a regular income on
the death of the person insured. Cover can often be obtained at
a modest cost yet it provides a valuable benefit.
Critical illness cover is available alone or combined with life
insurance. It provides cover against being diagnosed with a serious
disease, such as cancer, even though the insured person might be
able to work. Cover is more expensive than straightforward life
insurance.
Income protection policies, also known as Permanent Health Insurance,
pay a regular income to the insured person who is unable to work
because of illness or injury and suffers a loss of income. In certain
cases or more manual occupations, it can occasionally be difficult
to obtain cover.
Private medical insurance covers the cost of private medical treatment
for acute conditions. It allows the insured person to receive treatment
quickly, or at a time of their choosing, thereby minimising the
disruption to the business. There are different sorts of policies,
from low cost with limited cover to those offering wide-ranging
cover and benefits. These can be tailored to the needs of the business.
All of these types of insurance can be bought for individuals,
or groups of individuals, and can be used in a variety of ways to
provide useful and often essential cover to meet many needs.
As appropriate use and application of life insurance products can
be complicated, seek advice from a qualified independent financial
adviser on the IFA Promotion website.
If you choose to deal directly with an insurer, it's worthwhile
checking that they are a member of the Association of British Insurers
(ABI). Check that an insurer is a member of the ABI on the ABI website.
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Protecting the business - loss of a key person
If your business relies heavily on one or two members of staff,
there can be serious consequences for the business if they become
ill or die. Small businesses in particular are often dependent upon
a key person for generating sales, managing a vital client or are
simply reliant upon the key person's expertise.
You can take out a policy, often called key person insurance, that
makes a payout to the business should the key person die or, with
critical illness insurance, be diagnosed with a serious disease.
The amount of money paid out is usually set in advance at a level
estimated to be the potential financial loss to the business.
Talk to your independent financial adviser to find out whether
key person insurance is appropriate for your business. You can find
an independent financial adviser on the IFA Promotion website.
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Protecting the business - loss of a partner or key shareholder
Loss of a partner - it is important to think about the possible
effect of the death or illness of a partner in a business. Insuring
the lives of the partners against death or illness can provide the
remaining partners with the necessary funds to let them buy the
deceased or ill partner's share of the business.
In this way, the partnership's assets remain in control of the
surviving partners and the deceased partner's beneficiaries receive
a lump sum reflecting the full value of their share.
Loss of a key shareholder - in some businesses, the shareholders
wish to retain control of the business, perhaps within a family.
In these cases, agreements are commonly drawn up between the shareholders
to ensure that control of the business is retained.
In such cases, it is sometimes worth insuring the life of key shareholders.
This ensures that in the event of the death of a controlling shareholder,
the insurance payout could be used to purchase the deceased's shares
- thereby ensuring that the shares do not pass to other parties.
It is wise to seek advice from your accountant or solicitor, as
well as from your independent financial adviser, because this is
a highly specialised area.
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Insurance protection for the owner-manager or the self-employed
If you are self-employed, or you own a small business, it is very
important that you carefully consider buying the right protection
for your own personal needs.
Life and critical illness insurance
Life insurance and critical illness insurance will pay out a lump
sum on your death or the diagnosis of certain specified serious
illnesses. Depending on your age, sex and health, this can be an
inexpensive yet valuable cover.
There are also different types of insurance designed to pay a regular
income if you are unable to work because of illness, injury or accident.
The benefit is agreed when you take out the policy. It is usually
paid weekly or monthly and is subject to a maximum of two-thirds
of your normal earned income, though it can be far lower.
The benefit is only paid while you are unable to work and continues
for a limited period, often one or two years. Income protection
insurance and personal accident and sickness insurance are both
common names for policies of this type.
The terms and costs vary widely. Get advice from your independent
financial adviser to make sure you choose the policy that's right
for you.
Private medical insurance
Private medical insurance covers the cost of private medical treatment
for acute conditions. It allows you to receive treatment quickly,
or at a time of your choosing, thereby minimising the disruption
to your business. There are different sorts of policies from low
cost with limited cover to those offering wide-ranging cover and
benefits. These can be tailored to your needs.
Seek independent financial advice to make sure you get the right
policies and the right cover.
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Insurance as an employee benefit
Life and health insurance is a valuable benefit to provide for
your employees. It can often be easy and relatively cheap to provide,
and plays a major role in helping you attract and retain good quality
employees.
It is possible to buy life insurance for employees individually,
but more commonly businesses take out life insurance for a whole
group of employees. This is called group life insurance and can
be arranged alone, though it is also often found linked to a pension
arrangement.
A group life insurance scheme might include all employees who have
been working in the business longer than a certain period, such
as six months.
Usually, the lump sum insured for each employee is a multiple of
their wage or annual salary, subject to a maximum of four times
annual salary. Employers might also set age conditions, eg insuring
only employees over 18 and under 65.
It is also possible to buy critical illness cover for your employees,
though this is less common, and is usually combined with a life
insurance arrangement.
There is a range of other types of insurance for your employees
and the need to provide these benefits may depend on the need to
compete with other businesses for the best employees.
Other types of insurance offered as employee benefits include:
- private medical insurance - pays for the treatment of agreed
acute conditions
- income protection - pays regular income to employees who are
unable to work because of illness or injury
Bear in mind that your employees will pay tax on some benefits
if they earn more than £8,500 per year. Your accountant or
benefits adviser will be able to tell you which employee benefits
are taxable. Tax relief is no longer available on any pension contributions
paid by individuals which are used to fund life insurance policies.
Choosing and introducing employee benefits is a highly specialist
area, and is well served by independent advisers. Find an independent
financial adviser on the IFA Promotion website.
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Here's how I've protected my business against the loss of key
staff
In late 2003, Alex Rowe, joint managing director of laundry firm
Combined Linen Service Group, suffered a stroke which forced him
out of work for six months. Fortunately the business had mitigated
the potentially devastating fallout by taking out key-man insurance.
The policy paid out a lump sum of £250,000 to compensate for
the losses incurred during his prolonged absence.
What I did
Review business threats and risks
"Due to the rapidly expanding nature of the business we decided
that we needed to conduct a review of our business strategy. As
part of this we identified the major threats that could put us out
of business or inflict serious damage on our prospects. It became
clear that if either myself or the other managing director fell
ill or died then the business would face major difficulties. It
was felt that without our specialist knowledge and contacts the
continued profitability of the business could be at risk. Alongside
this assessment we completed a review of our insurance protection
and it became clear that while we had insured things like our vehicles,
we had failed to insure the company's most vital asset - its key
people."
Reduce the risk
"Having identified this weak point we examined ways of mitigating
the risk. We looked at ways of ensuring other staff members would
be able to cover our roles in the event of unforeseen absences.
But the problem is most operations manuals are difficult to write,
harder to understand, and rarely kept up to date. So we decided
to take out an insurance policy, known as key-man insurance, which
would compensate the business in the event of the loss of a key
member of staff for a prolonged period. Together with our insurance
broker, Jelf Group, we worked out the level of financial cover needed
to compensate for any drop in profit or the costs incurred in providing
a temporary replacement."
Put plan into action
"When I fell ill our recovery plan was put into effect. Luckily
my absence spanned the winter months, which is traditionally a quieter
time for the business. However, because we had already spent time
forecasting the effect the loss of a key employee would have, the
policy was activated in no time and the insurer paid out within
eight weeks. In my absence the business was unable to secure many
new business deals so the lump sum of £250,000 helped to maintain
the business' profitability. In addition, it covered the costs incurred
in providing temporary staff to help the business cope."
What I'd do differently
Prepare review procedures earlier
"If we had examined the business risks on a more regular basis
we might have put ourselves into a better position when it came
to arranging the key-man insurance. Rather than simply saying that
it was something that had started to concern us, we could have shown
the broker that we had systems and management procedures in place
that could have helped us to negotiate better terms on the policy."
Alex Rowe
Combined Linen Service Group
Alex's top tips:
"Everyone is busy but if you don't take time to plan for the
loss of key employees and the worst happens, you'll suffer an even
more painful ordeal."
"Find the right broker, first time - spend as much time on
this as possible."
"Build a good relationship with your broker to ensure you are
covered if things go wrong."
Top
Liability insurance
If someone is injured or their property is damaged, the person
or business responsible may be sued and held legally liable for
the injury or property damage. Where legal liability is established,
damages will be awarded to the claimant to compensate them for their
injury or the damage to their property. Where damages have been
paid for an injury, the NHS is entitled to recover costs for hospital
treatment, including ambulance costs. The person or business responsible
will also need to pay legal costs, including the claimants'.
Liability insurance is designed to protect your business against
these costs.
If your business has employees, it is likely that employers' liability
insurance is compulsory. However, there are a few instances where
insurance is not compulsory.
This guide explains what cover each type of liability insurance
offers and how liability insurance is sold and priced.
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How liability insurance works
The cost of insurance - known as the premium - is the price the
insurer charges to accept your business. The price charged by an
insurer will depend on a number of factors, such as the nature of
your business and the insurer's own experience of your business
sector.
For most small to medium-size risks, the insurer will use a book
rate, or average rate, which is based on the claims they have paid
out to similar businesses. The insurer will use this rate to calculate
the premium using a factor that reflects the amount of activity
undertaken by the business. For employers' liability insurance,
payroll is usually used to reflect the amount of activity. For public
and products liability insurance, turnover is usually used.
The insurer may adjust the resulting premium to reflect positive
features such as a good claims record or good risk management, or
negative features such as a poor claims record.
For large or very large cases the insurer may calculate the premium
based on the business' claims record over a number of years, if
it is relative stable.
Use our interactive health & safety performance indicator tool
to find out how well you're managing your health and safety, and
see our guide on how to create and operate a health and safety policy.
Legal expenses insurance
Legal expenses insurance covers the cost of pursuing legal action
or defending your business against legal action where this isn't
covered by your liability insurance, eg in an employment tribunal.
The insurer will pay fees and expenses for solicitors, barristers,
accountants and expert witnesses, as well as court costs and opponents'
costs if you are ordered to pay them in a civil court. Legal expenses
insurers often provide advice and a legal helpline.
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Employers' liability insurance
Employers' liability (EL) insurance enables businesses to meet
the costs of damages and legal fees for employees who are injured
or made ill at work through the fault of the employer. Employees
injured due to an employer's negligence can seek compensation even
if the business goes into liquidation or receivership. The NHS can
also claim the costs of hospital treatment (including ambulance
costs) when personal injury compensation is paid. This applies to
incidents that occur either on or after 29 January 2007.
Read about the Injury Costs Recovery Scheme on the Department of
Health (DoH) website.
By law, an employer must have EL insurance and be insured for at
least £5 million. Most insurers automatically provide cover
of at least £10 million. Your EL insurance must cover all
your employees in England, Scotland, Wales and Northern Ireland.
If your business is not a limited company, and you are the only
employee or you only employ close family members, you do not need
compulsory ELCI. Limited companies with only one employee, where
that employee also owns 50 per cent or more of the issued share
capital in the company, are also exempt from compulsory EL insurance.
However, there is nothing to prevent an exempt employer from choosing
to buy EL insurance, and many do, in view of the financial security
it can provide.
The Health & Safety Executive (HSE) is responsible for enforcing
the law on EL insurance. You can be fined up to £2,500 for
each day that you do not have appropriate insurance.
Generally, someone is defined as your employee if:
- They are under a contract of service
- You deduct National Insurance contributions and income tax from
the salary you pay them
- You control when, where and how they work
- They cannot employ a substitute when they are unable to work
Many EL policies available in the market will contain a wide definition
of employee that will cover most circumstances.Download a guide
to EL insurance from the HSE website.
Useful checks
Your policy must be issued by an authorised insurer otherwise it
will not be valid and you risk breaking the law. You can check that
an insurance provider is a member of the Association of British
Insurers on the ABI website. Your insurance broker can also tell
you which companies offer suitable EL insurance policies.
Displaying your EL compulsory insurance certificate and HSE inspections
When you take out a policy you will receive a certificate of employers'
liability compulsory insurance.
You must display a copy of this document where employees can easily
read it. You can display it either:
- As a paper copy, eg as a photocopy pinned to a notice board
- Electronically, eg as a page on your intranet or as a document
in a shared folder on your network
You also need to make these certificates available to health and
safety inspectors on request.
If you do not display your EL compulsory insurance certificate
or refuse to make it available to HSE inspectors when they ask,
you can be fined up to £1,000.
You are strongly advised to keep, as far as is possible, a complete
record of your employers' liability insurance. This is because some
diseases can appear decades after exposure to their cause and former
or current employees may decide to make a claim against their employer
for the period they were exposed to the cause of their illness.
If you fail to hold the necessary insurance details you risk having
to meet the costs of such claims yourself.
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Public liability insurance
If members of the public or customers come to your premises or
you go to theirs (including if you work from home), you should think
about taking out public liability (PL) insurance.
What the insurance covers
PL insurance covers any awards of damages given to a member of the
public because of an injury or damage to their property caused by
you or your business. It also covers any related legal fees, costs
and expenses as well as costs of hospital treatment (including ambulance
costs) that the NHS may claim from you. Read about the Injury Costs
Recovery Scheme on the Department of Health (DoH) website.
Premiums are based on the type of business and rated on an estimate
for the level of activity of the business. For most businesses this
will be the turnover, although other factors may be used. For example,
premiums for a hotel might be calculated on the number of beds provided
to reflect the number of guests.
Talk to a professional
There are many conditions, exclusions and warranties that can be
applied to PL policies. It is therefore important that you discuss
your policy with your insurance adviser to ensure that it meets
your needs. Find a broker on the British Insurance Brokers' Association
(BIBA) website - Opens in a new window or compare insurance quotes
on the Simply Business Insurance website.
If you choose to deal directly with an insurer, it's worthwhile
checking that they are a member of the Association of British Insurers
(ABI). Check that an insurer is a member of the ABI at the ABI website.
Businesses which must take out the insurance
Generally speaking, PL insurance is not compulsory; however, horse
riding establishments are required to have PL cover. You will also
find that many of your customers or potential customers require
proof of adequate insurance before they will allow you to work for
them.
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Product liability insurance
In product liability insurance terms, a product is any physical
item that is sold or given away.
Products must be 'fit for purpose'. You're legally responsible
for any damage or injury that a product you supply may cause.
Your responsibilities
If you supply a faulty product, claimants may try to claim from
you first, even if you did not manufacture it. You'll be liable
for compensation claims if:
- Your business' name is on the product
- Your business repairs, refurbishes or changes it
- You imported it from outside the European Union
- You cannot clearly identify the manufacturer
- The manufacturer has gone out of business
Otherwise, the manufacturer is liable - or the processor, where
the product involves parts from multiple manufacturers.
However, you must also:
- Show that the products were faulty when they were supplied to
you
- Show that you gave consumers adequate safety instructions and
warnings about misuse
- Show that you included terms for return of faulty goods to the
manufacturer or processor in any sales
- Contract you issued to the consumer
- Make sure that your supply contract with the manufacturer or
processor covers product safety, quality control and product returns
- Have good quality control and record-keeping systems
What is covered
Product liability insurance covers you against damages awarded as
a result of damage to property or personal injury caused by your
product. If damages are paid for personal injury, the NHS can claim
to recover the costs of hospital treatment (including ambulance
costs). This applies to incidents that occur either on or after
29 January 2007.
Read about the Injury Costs Recovery Scheme on the Department of
Health (DoH) website.
Product liability insurance may not cover you against financial
losses to a business or person caused by a faulty product which
you manufactured, serviced or supplied. Download a guide to the
Consumer Protection Act 1987 from the Department for Business, Innovation
& Skills (BIS) website.
Product liability insurance also covers you against unforeseen
circumstances, such as product faults your quality control system
couldn't trace. However, if you simply make an inferior product,
you may be unable to make a claim, or even get insurance. Bad workmanship
is not covered either.
Before issuing a policy your insurer will want to know that your:
- Manufacturing or services are conducted according to industry
best practice
staff are adequately trained
- Equipment and systems are appropriate, up to date and well maintained
- How much cover to take out
- Most businesses have cover of between £1 million and £5
million. The norm is £2 million.
Implementing quality control measures may help to reduce your premiums
and will certainly reduce the risk of compensation claims and protect
your reputation in the marketplace.
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Insurance against pollution damages
Most public liability policies include pollution liability as standard,
which covers damages paid to a third-party who has suffered as a
result of pollution caused by your business activities.
Pollution liability as part of public liability insurance covers
sudden and unexpected incidents that take place during the insured
period, such as one-off accidents.
If your business operates in an industry where there is a higher
risk of pollution during everyday operations, eg the oil industry,
you may want to opt for a bespoke policy such as environmental impairment
liability. This can be designed specifically for your industry sector
or even your particular business.
Environmental impairment liability should cover:
- Clean-up costs from any creeping pollution
- Damages awarded for injury to people or property
- The cost of investigating and defending the company against
such claims
The Environment Agency is responsible for regulating businesses
in these circumstances. Read about how the Environment Agency regulates
businesses on the Environment Agency website.
Talk to your insurance broker to find out if such specialist protection
would be a good idea for your business.
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Property owners' liability insurance
Property owners' liability insurance enables you to meet any costs
and damages awarded to a member of the public if they suffer an
injury following an accident on, or linked to, your premises. This
will include costs of hospital treatment and ambulance costs claimed
by the NHS, if someone is awarded personal injury damages and the
incident occurred either on or after 29 January 2007. Read about
the Injury Costs Recovery Scheme on the Department of Health (DoH)
website.
For private property owners, this protection is generally included
in a household policy. For most businesses, any claim arising from
your ownership of a property would be included in your public liability
cover. Where you insure your contents and business, and a landlord
insures the premises, make sure that property owners' liability
is included in at least one of these policies.
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Professional indemnity insurance
If you are in the business of selling your knowledge or skills,
you may want to consider taking out professional indemnity (PI)
insurance.
What you will be covered for
PI insurance protects your business against claims for loss or damage
by a client or a third party if you have made mistakes or are found
to have been negligent in some or all of the services that you provide
for them. PI insurance will also cover legal costs.
Many professions are required to have PI insurance cover as a regulatory
requirement or as a result of their professional authorisation.
This includes solicitors, accountants, architects, mortgage intermediaries,
insurance brokers and financial advisers. Many consultants, advertising
and PR agencies, and designers also choose to have this type of
insurance.
Ensure you are properly covered
One important aspect to bear in mind when considering PI insurance
is that cover is usually on a claims-made basis. This means that
the policy will only respond to claims that are made while the policy
is 'live'.
So, if you plan to cancel your policy when you close your business
or retire, you may need to arrange 'run-off' cover for a period
of time afterwards.
Also, if you plan to change insurers, you will either need to arrange
run-off cover or get agreement from your new insurer to accept new
claims for prior incidents.
Keep everything well documented
One way to minimise such claims is to make sure projects are well
documented. Ensure that you set out specific responsibilities in
your contracts with clients beforehand and deal with complaints
promptly.
As this is a specialist area of insurance you should take advice
from a suitably experienced insurance broker. For help on consulting
an insurance broker, see the page in this guide on how to seek specialist
advice. If you choose to deal directly with an insurer, it's worthwhile
checking that they are a member of the Association of British Insurers
(ABI). Check that an insurer is a member of the ABI at the ABI website.
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Directors' and officers' liability
Directors and officers of businesses have various duties, responsibilities
and powers in connection with their position. In most cases these
are set out in a job description or terms of reference. As a result
they can be held responsible for a range of issues including:
- Health and safety
- Data protection
- Maintaining satisfactory accounts
- Fraud
- Negligence
If your business' directors or officers are found to have inadvertently
acted outside their terms of reference and this gives rise to a
claim, then compensation and legal fees will be covered by directors'
and officers' liability insurance. If the act was deliberate, then
it may not be covered by the policy.
Your insurance broker will be able to provide more information
about this type of policy. Find a list of registered insurance brokers
on the British Insurance Brokers' Association (BIBA) website. If
you choose to deal directly with an insurer, it's worthwhile checking
that they are a member of the Association of British Insurers (ABI).
Check that an insurer is a member of the ABI at the ABI website.
Top
Seek specialist advice
Businesses are operating in an increasingly litigious environment
where people are more inclined to seek compensation. The implications
of a liability claim against your business could be huge because
successful claims can sometimes lead to damages of millions of pounds
being awarded against you. That is on top of all the legal fees.
For most small businesses, this could spell financial ruin.
Business owners can also be held personally liable and even face
criminal charges if they are found to have been negligent.
The importance of taking out adequate insurance cover
To protect yourself and your business, getting adequate insurance
cover is vital. It is worth consulting your insurance broker to
find out which types of insurance, and what levels of cover, are
appropriate for your business.
You can select a broker on the British Insurance Brokers' Association
(BIBA) website - Opens in a new window or search for a broker on
the Institute of Insurance Brokers (IIB) website.
Insurance brokers and advisers are regulated by the Financial Services
Authority (FSA) and you should make sure that your adviser has FSA
authorisation. Check that an insurance broker is regulated by the
FSA on the FSA website. If you choose to deal directly with an insurer,
it's worthwhile checking that they are a member of the Association
of British Insurers (ABI). Check that an insurer is a member of
the ABI at the ABI website.
Premiums could rise at any time, so taking steps to reduce the
likelihood of a claim by managing risks is an important way to keep
costs down. Read our guides on risk assessment - an overview and
how to set up a health and safety management system.
Use our interactive Health & safety performance indicator tool
to find out how well you're managing your health and safety.
Top
Here's how I checked what insurance I need
Sheffield-based IC Innovations is a consumer product design company
that turns innovative ideas into real products, handling everything
from concept development through to manufacture, retail and international
distribution. The business' multi-faceted operation presented a
challenge when it came to getting the right insurance. Here managing
director Tristan Cowell explains what they did.
What I did
Get advice
"Our business had several potential areas of liability when
it came to selecting insurance products. We initially contacted
the Sheffield Enterprise Agency for advice and they were able to
point us in the direction of a local insurance broker. It was important
to us to have someone who was on the doorstep so that we could talk
face-to-face and bounce queries off them.
"We don't use our broker for every type of insurance. For
some of the more common products, such as compulsory employers'
liability (EL) insurance, it's simpler and cheaper to do it online.
You can get some very competitive quotes if you shop around."
Assess product options
"In addition to EL insurance, we needed product liability insurance
and public liability insurance from day one, as we knew that clients
would insist on it. Our broker arranged both for us.
"Another area they suggested looking into was insurance of
goods in transit and during warehousing. In both those cases, we
checked with our haulage company and warehouse contractors and found
we were covered by their own insurance. However, you should never
assume that's the case - always ask.
"It's useful to remember that just because a particular insurance
product exists, that doesn't necessarily mean you have to have it.
For example, we considered patent protection insurance, as we held
several product patents, but decided against it. It was very expensive
and we calculated that we already had enough money set aside to
defend a patent in court if the need arose."
Address overseas trade
"As the business grew and we began trading in the USA, this
raised new insurance questions. We went back to our broker and they
advised finding a specialist US-based broker who was 'on the ground'
out there and knew the market well. This has worked out very well.
"We also started outsourcing production to China, which meant
once the goods arrived at a Chinese port, they became our responsibility
for the voyage to the UK. We found a shipping agent who was also
able to advise us on marine cargo insurance. Over time, we've learnt
that there isn't always a logical correlation between the size of
the shipment and the insurance cost! So again, it pays to research
all the options."
Review our insurance regularly
"We review all our insurance every year to make sure we're
up to date with legislation and that we're getting the best deals.
It's also important to revisit policies when we introduce a new
product, as it may have specific insurance requirements."
What I'd do differently
Take on a US broker sooner
"When we first started trading in the US, we thought the best
way to buy the appropriate insurance was via a UK company. However,
this proved unbelievably costly and I wish we'd sought advice from
our original broker and got our US-based broker on board sooner."
Top
Get the right insurance for your business
There are many different types of business insurance available
- but which ones do you need to have, which should you have, and
which don't you need at all?
Top
Product liability
If your business supplies products to consumers, you need to make
sure the products are safe.
The heaviest responsibility falls on producers, eg the manufacturer
of a product. But distributors - such as shops and wholesalers -
also have legal responsibilities.
Failing to meet your responsibilities can have serious consequences.
You could face legal action with possible fines or even imprisonment.
You could also be sued by anyone who has been injured or has suffered
damage to personal property as a result of using your product.
You should be aware that you can't avoid liability just by warning
people the product isn't safe. You could be sued by anyone who is
harmed by your product - even if you sold the product to someone
else.
This guide outlines the basics of product liability and product
safety law. It will help you understand how you are affected, and
what action you need to take.
Top
Your responsibilities
By law, products sold to consumers must be safe. Of course, some
products can't be completely safe - eg knives with sharp edges -
but all products must be as safe as people have a general right
to expect.
The main responsibility falls on producers - seen as manufacturers
and importers into the European Community - to ensure they sell
safe products. They also need to:
- Take action to warn about potential risks
- Ensure consumers have information to help them understand the
risks - eg what safety precautions they need to take
- Monitor the safety of products - eg by keeping a register of
complaints and investigating them, and testing products
- Take action if a safety problem is found
- Recover and recycle set amounts of packaging
- Ensure safe disposal at the end of a product's life, if it is
electrical or electronic equipment
If your business handles more than 50 tonnes of packaging materials
a year and has a turnover of more than £2 million, you need
to follow the Producer Responsibility Obligations Regulations 2007.
You can find out about packaging waste obligations on the NetRegs
website.
Producers and distributors are legally obliged to notify the relevant
authorities of unsafe products. In respect of consumer products
in the UK, this will be your local authority (typically, the Trading
Standards Department). You should read the unsafe product notification
guidance for businesses on the Department for Business, Innovation
& Skills (BIS) website.
Be particularly careful with high-risk products that might be misused
or children's toys. Specific regulations apply to products like
fireworks, food and medicines. Read guidance leaflets on safety
on the Trading Standards Institute (TSI) website.
You need to take an active approach to preventing problems, or
risk enforcement action, such as fines or even imprisonment. If
a safety defect causes harm to someone or their property, they may
be able to sue under product liability laws.
You can download a guide about the product liability and consumer
safety provisions of the Consumer Protection Act 1987 from the BIS
website.
You can also download the General Product Safety Regulations 2005,
and accompanying guidance for businesses from the BIS website.
Even if you don't manufacture the products you sell, you will still
have safety responsibilities. You must not sell any product which
you know, or should know, is unsafe. You can find recent product
recall notices on the TSI website.
You also need to:
- Pass on safety information to all your customers
- Help monitor product safety - eg by investigating complaints
and passing information back to the producer
- Co-operate with producers and others - eg if a product is recalled
because it is unsafe
- Notify the authorities - usually your local Trading Standards
officer - of any unsafe products
- Retain all relevant documentation to enable the origin of unsafe
products to be traced
It's strongly advisable to insure your business against potential
damages claims. See our guide on liability insurance.
If you import or export your products, there are further considerations.
See our guide on insurance for international trade.
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Am I liable?
The main responsibility for product safety falls on producers.
This includes:
- Manufacturers
- Importers
- Businesses that supply own-brand products
- Businesses that change the safety of the product - for example,
by customising or servicing it
Often, several businesses are involved as producers. For example,
several component makers might supply parts to a manufacturer that
assembles the product. If the product causes harm, all of these
businesses could be jointly liable.
Distributors, such as shops, are not normally liable for harm to
consumers or their property resulting from an unsafe product as
long as they identify the producer. But distributors do have some
responsibility for safety and can face enforcement action - see
the page in this guide: what happens if I am liable?
Anyone who is harmed by an unsafe product could sue - even if they
didn't buy the product themselves. They can begin their court case
up to three years from the date of the injury, and sometimes later.
In some cases, they can even sue up to ten years after the product
was sold.
If you're involved in producing or supplying consumer products,
you will need to take practical steps to prevent problems - see
the page in this guide about preventing problems.
You can also download a guide about the product liability and consumer
safety provisions of the Consumer Protection Act 1987 from the Department
for Business, Innovation & Skills (BIS) website.
It's strongly advisable to insure your business against potential
damages claims - see our guide on liability insurance.
Top
What happens if I am liable?
If you are liable for harm caused by an unsafe product, you can
be sued. Anyone who is harmed can sue - even if they didn't buy
the product themselves.
The user can sue for compensation for death or injury. If faulty
goods cause injury or damage to property, they can also sue for
damage or loss of private property, as long as the damage amounts
to at least £275. The amount they can claim will depend on
the harm they have suffered. There is no fixed upper limit.
Many businesses take product liability insurance to protect them
from legal costs and damages awards. In any case, you need to take
practical steps to make sure that products are safe to begin with.
See the page in this guide on preventing problems.
Enforcement authorities can take action if they think unsafe products
are being supplied.
Trading Standards officers in local councils are responsible for
most safety enforcement. Some special products, such as food and
medicines, are dealt with by other authorities. Check with your
local Trading Standards office if you are unsure. You can find your
local Trading Standards office on the Trading Standards Institute
(TSI) website.
Trading Standards officers can buy or seize goods to see whether
they are safe. They can also enter your premises to see whether
you are breaking the rules. If they think your products are unsafe,
they can order you to stop selling them. They can go to court and
ask for the products to be destroyed.
They can also prosecute you. If you're convicted you could be fined
or imprisoned. Enforcement authorities also have powers to order
the recall of an unsafe product from consumers.
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Defending a product liability claim
If someone sues you under the product liability laws, your first
step is to consider who is liable. If you are a distributor, such
as a shop, you may not be liable if you can identify the original
producer.
If you're the producer and you believe the problem was caused by
a fault in your production process, you may want to admit liability
and settle the claim. Alternatively, you will need to prove one
of six defences:
- You did not supply the product. For example, you are not liable
if a product is stolen, or it is a counterfeit copy of one of
your products.
- You could not reasonably be expected to discover the safety
defect. For example, if scientific evidence first comes to light
after you have manufactured or sold your product.
- The safety defect was an inevitable result of complying with
other laws.
- Someone else caused the defect after you supplied the product.
- You didn't supply the product in the course of business. For
example, the law does not apply to private gifts.
- If you make components, you are not liable if you can show that
the manufacturer who assembled the product caused the fault. For
example, the manufacturer might have made a poorly designed product
or ordered the wrong components from you.
You can't defend yourself simply on the basis that a user was careless.
But if you can show that they contributed to a problem, the amount
of damages may be reduced. If Trading Standards take enforcement
action against you under product safety regulations, you can also
choose to defend yourself. You need to prove you did everything
that could reasonably be expected. If you're successful, you may
get compensation for any loss you suffer, for example, if Trading
Standards destroyed your goods.
You should be aware that court cases are usually expensive and
complicated. Take professional legal advice before taking any action.
Top
Preventing problems
Producers and manufacturers must make safety a key part of production.
This means that you must:
- Include safety at every stage, from initial design through to
selling.
- Check whether there are any specific regulations covering your
product.
- Check whether there are any safety standards that apply to your
product. If so, check that you meet the standards.
- Think how you can ensure that your products meet your quality
standard. This could be by testing samples. You could consider
introducing a formal quality assurance scheme.
Importers are responsible in the same way as manufacturers. Although
you cannot control production, you should take a similar approach
to preventing problems.
Distributors, such as shops, must not do anything that affects
product safety. Otherwise, you could have the same responsibilities
as a producer. You should therefore:
- Give customers any safety information provided by the producer
- Investigate safety complaints from customers, and tell the manufacturer
- Co-operate with Trading Standards officers
Think about ways to protect yourself if you are sued. Consider
the following:
- Purchasing product liability insurance to cover damages and
legal costs.
- Agreeing contracts that pass on costs. For example, you can
ask a supplier to indemnify you against any claim for damages
caused by their products.
- Keeping adequate records. You may need to defend yourself against
a claim up to ten years after supplying a product.
If you think you're at risk, take advice from your business adviser
or solicitor. Your trade association may also help with information
about standards and best practice in your industry.
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