Yes. Well, maybe.
Starting up a small business is daunting. If it’s your first time there is an awful lot you need to learn, even more you need to do, and even more that you could get wrong.
One of those things is small business insurance. You might need it, and if you do, you need to learn about the different types of insurance, which you need, and which are recommended.
Essentially, being based in a co-working office space has nothing to do with whether you need small business insurance. It might get you out of paying some of the costs associated with running a business, but insurance is another matter entirely.
Do You Employ Anyone?
If not, you’re off the hook! By which we mean that you don’t legally require employer’s liability insurance, but there are a few types of insurance you might want to consider, which we’ll cover later.
Firstly, we need to clarify what is meant by an employee. Unfortunately, this can differ by insurer, but here’s a definition that is quite broad and pretty universally accepted.
An employee is any person with a connection to your business who:
- You employ with a contract of a service or apprenticeship
- Is hired by your company, or borrowed by your company to undertake a service
- Is self-employed and working under your supervision in any capacity, even under a labour only basis
- Is working for labour only subcontractors of your business
- Is associated via a work experience or training scheme
- Is helping you or your business on a voluntary basis
The only form of employment that might still be considered a grey area after this definition is freelancers. And it is a bit of a grey area. Essentially, if you employ freelancers who you only ever see virtually, they don’t use a shared premises (even a coworking space) and they use all of their own equipment, not equipment supplied by you, then you don’t require employers liability insurance. If you’re not responsible for their working environment, then you don’t need the insurance as you can’t be responsible for any accidents they suffer whilst working.
Here’s a quick breakdown of instances in which people often don’t think they need employer’s liability insurance when they actually do:
- Part-time workers - even if they only work for 20 minutes per week, you still need cover
- l Volunteers - if you control their work environment in any way, you need cover
- l Temporary staff - even if they’re only employed for a day, you need cover
- l Work experience students - see above
- l Freelancers, contractors, or subcontractors - the law doesn’t really care how you refer to people working for you if you’re determining their work environment… well, we're sure you get the message by now!
What If You Do Employ People?
If you employ staff - even just one person. Even just one person and it’s your significant other, or you don’t think they’re in it for the long haul anyway, or they’re not actually very good so as soon as you have enough clients to quit your full-time job, you’re going to part ways with them, you need employer’s liability insurance. It’s that simple.
In reality, it’s not quite that simple. If you’re a sole trader and you only employ immediate family members, you don’t need employee liability insurance (because family members wouldn’t ever sue each other, right?)
The point is, if you employ anyone in any way, you need to have employer’s liability insurance and it is required to have a cover limit of at least £5 million. This last point isn’t too much of a big deal – you’ll find that most employer's liability insurance comes with £10 million cover as standard.
What is Employer Liability Cover?
To put it as simply as we can, this insurance covers costs that arise from claims made by any of your employees while they’re at work.
If you don’t have employer’s liability cover in place despite employing someone, you can be fined £2,500 for every day you’re not covered.
So, you understand employer's liability insurance - that’s all there is to it, right?
Absolutely not. In many cases, it’ll be the only insurance that is required by law, but there is much, much more for you to think about.
Public Liability Insurance
If people ever visit you for business purposes, you might need public liability insurance. If you’re working in a co-working space there’s a strong chance their insurance will cover you, so make sure you check before splashing out on this.
Buildings Insurance
If you own your own premises you really need insurance as a form of protection, much like your home insurance - although buildings insurance is not required by law. However, not having to worry about buildings insurance is yet another benefit of working in a co-working space.
Contents Insurance
This is definitely one to think about. Firstly, check if your home insurance offers any coverage – often, you’ll find that up to £5,000 of home office equipment is covered, even if damaged outside of your home. Secondly, find out what cover is offered by your co-working space. From that, you should be able to conclude whether you need any further insurance.
Goods in Transit Insurance
Deliver goods to customers? This is one to strongly consider. Your car or van insurance probably covers less than you think, and it almost certainly won’t cover the loss or damage of stock in transit.
Professional Indemnity (PI) Insurance
If you work with clients, as a web design or marketing agency, in particular, this insurance is one to consider. PI insurance covers you against claims made by your clients for any damage your professional decisions cause to their business. This is important for freelancers, consultants and contractors too.
Product Liability Cover
If you sell a product, or even if you repair other people’s products, this insurance covers you against any injury or damage caused by defective products.
Intellectual Property (IP) Insurance
This is a fantastic insurance cover; your intellectual property needs to be protected. If your business relies on patents, trademarks or designs, this insurance can be invaluable.
Fidelity Guarantee
This might not become overly useful until you’re employing a number of people; it protects you against dishonest employees stealing from your business.
On that cheery note, hopefully, you’re now a little more aware of the insurance cover your small business may or may not need while you’re in a co-working space.
There’s one thing you definitely need when you’re starting a small business in a co-working space, and that’s an outstanding co-working space. And if there’s one thing we can help you out with, it’s that.
Check out some of our co-working offices and find one near you.