What a small business actually needs to insure first

Owner-run businesses rarely have the budget to insure everything at once, so the useful question is not what could be covered but what should be covered first. The order depends on which losses the business could not absorb.

First: the loss that would end the business

For most small businesses that is a fire or a flood destroying premises and stock, and it is why property cover comes first. The standardised small-enterprise products make this easier than it used to be, since the wording is identical across insurers and the comparison reduces to service and price.

Attach business interruption to it if at all affordable. A retailer whose shop burns in October faces two losses - the stock, and a festive season that does not come back.

Second: the liability that could exceed your net worth

Property losses are capped by what you own. Liability losses are not. A customer injured on your premises, a product that causes harm, or professional advice that leads to a client's loss can produce a claim far larger than the business itself.

Public liability suits anyone with a physical premises customers enter. Product liability suits manufacturers, traders and anyone putting goods into the market under their own name. Professional indemnity suits clinics, consultants, architects, accountants and IT services firms - and is increasingly a contractual requirement rather than a choice.

Third: the people

Where you employ workers, employee compensation cover is a statutory matter, not a commercial preference. Group personal accident is inexpensive and covers staff on and off duty. Group health becomes a retention tool as much as a protection, and even a modest scheme changes how a small team feels about the employer.

Property losses are limited by what you own. Liability losses are limited by what a court decides.

Sector by sector

A retail shop needs property, stock, burglary, money in transit and safe, public liability, plate glass, and neon or signage cover. A clinic or diagnostic centre needs professional indemnity as its first priority, alongside equipment breakdown for expensive diagnostic machines, medical waste liability and public liability.

A workshop or small factory needs property, machinery breakdown, employee compensation, product liability and business interruption - and should look hard at whether a single machine failure would halt production, because that is an equipment breakdown claim with an interruption tail.

A services or technology firm has little property and substantial intangible risk: professional indemnity, cyber cover, and directors' liability if there are external investors or a board.

Things owners commonly miss

Money cover for cash on premises and in transit to the bank. Fidelity guarantee for dishonesty by employees handling stock or cash. Goods held at a third-party warehouse or with a job worker, which your own premises policy does not cover. Electronic equipment cover, which responds to failures that a standard fire policy does not.

And rented premises. Tenants routinely assume the landlord's policy protects their stock and fitouts. It protects the landlord's building.