What are the different types of insurance any business owner should be aware of and what are the differences between each type?
With abbreviations like NCB, PL, EL, GIT, CAR and PI, it’s no wonder people find insurance mystifying.
But as mystifying as it seems to be, it’s a vital investment when you consider that each year the UK court system orders businesses to pay millions in compensation and legal fees.
Lyndon Wood, creator and owner of Construct Quote, offers the following insights into the different types of insurance that any business owner should be aware of:
Vehicle insurance
GIT
Now, this particular abbreviation might sound like an insult, but it’s actually important cover, especially if you carry goods in your vehicle.
Goods in transit (GIT), is essential for couriers, hauliers and even those who carry their own tools in their vehicle.
Imagine you had just secured a contract for a big job and you’re about to set off when you realise that all your tools have been nicked from your van (or car).
Not only will you lose your contract, you could potentially lose your business. Tools aren’t cheap, and shelling out the cash to replace what’s been stolen is no walk in the park.
A GIT policy, will cover goods in your vehicle; whether that’s other people's packages and parcels or your own work tools and materials.
It’s definitely a policy worth thinking about if you’re a tradesman, delivery driver or a haulier.
NCB
Everybody loves a good bit of discount, and that’s exactly the essence of NCB.
No Claims Bonus (NCB), sometimes referred to as NCD, has a direct impact on the price you’ll pay for your vehicle insurance.
Every year that you complete your insurance term without a claim occurring, you will gain an additional year NCB. It’s basically your insurer rewarding you for driving carefully.
No matter which way you look at it, insurance is about risk, and the more careful you are, the lower the risk you will be to an insurer.
NCB is a reduction in the calculated price of your insurance premium and the greater number of years NCB you have, the greater the reduction will be.
Most companies will only accept NCB earned in the UK, this is simply because driving laws across the globe vary.
Usually the NCB will only apply to the policyholder and can only be used on one vehicle any given time.
NCB will usually be the same whether you have a private or a commercial policy.
Fleet
Not to throw a spanner in the works, but fleet discounts work a little differently to a single vehicle commercial/private policy (NCB).
A fleet policy is a multi-vehicle company policy and discounts apply to the company registered on the policy rather than to an individual person or vehicle.
This is because a company could change the number of vehicles it insures under the policy and could also change the people who drive the vehicles.
The discount applied for claim-free driving isn’t referred to as NCB; it’s referred to as fleet driving experience.
It’s basically the same as NCB when it comes to discounts, but it’s less about who and which vehicle and more about the company.
Liability
PL
First off, any established business or business startup should consider the implications of being involved in a sticky claim situation whilst not having a public liability policy in place.
In short, a public liability (PL) policy will cover your clients including other members of the public for third party property damage and injury.
Imagine that a member of the public is seriously injured because you failed to do an adequate health and safety check.
You’d have to pay the medical fees, compensation, legal fees plus there’s always the risk of racking up a bill that puts you out of business.
Even if the claim is unsuccessful, you’ll still have to pay the legal fees and those on their own aren’t cheap.
From a businessperson’s perspective, the most important insurance policy you can invest in is PL.
Why? Because it could potentially save your business if a claim is made against you.
EL
Rule of thumb; if you have employees, you have to have an employers liability (EL) policy.
Even if you only employ subcontractors, temporary workers or apprentices, you are still legally required to insure them.
Unlike public liability, employer’s liability covers your employees against injury or disease as a result of their time under your employment.
If you don’t have a minimum of £5million cover, or if you fail to insure them you will face a fine of up to £2,500 for everyday that you have been without the proper cover - if in doubt, get it.
You’ll also face a £1,000 fine if you fail to produce your certificate when requested by a HSE director.
PI
I’m sure we’re all guilty of giving someone some not-so-good advice, but in business this could have some serious consequences.
Professional indemnity (PI) is a constituent of liability insurance, but differs in the respect that it’s designed to benefit the professional in the event that poor advice/service has been given resulting in a financial loss to the client.
If you sell professional advice for a living, such as architects, accountants, solicitors and surveyors, you’ll need a policy.
PI policies are usually on a ‘claims made’ basis, which basically means that as long as you notify your insurer of any incident during your policy term that may raise a claim, it will be covered.
But if you cancel or don’t renew your policy then it will end cover for any subsequent claims - that’s why it’s important to have cover even when you’re in between contracts.
CAR
If you’re involved with extending, refurbishing, converting or new builds, you’ll probably want to consider a contractor's all risk (CAR) policy.
You’ll be responsible for the work until it’s handed over to the owner, which means that if there’s damage before you hand it over, you’ll be liable to pay for them.
The last thing you’ll want is a massive bill that you can’t afford to pay which sends your contract and your business down the pan.
A CAR policy will cover you for damages and will also help reinstate a project if an event occurs which renders materials unusable.
The most important decision you can make in business is choosing the right insurance with the right insurance company.
You should look for honesty, transparency and care in an insurance provider and avoid the ones who are only looking for a quick-sale.
I’ve built my business by earning the trust of my clients and have invested heavily in training specialists so they can answer any questions our clients have.
It’s about being there for them and making sure they know everything about the insurance product they’re buying.
