Insurance for entrepreneurs: how to protect yourself against risks in business

Business insurance is an important protection against unexpected situations and their consequences that can affect your financial stability. Whether you run a small business or a larger company, the right insurance can help you avoid serious losses in the event of property damage, liability or business failure.

Why is business insurance important?

Business risk insurance shouldn't just be seen as a cost item or a legal obligation, but more importantly as a strategic choice as part of your financial planning.

Investing in quality insurance may seem like an unnecessary expense until a major insured event occurs. Well set up insurance will save your business from serious financial problems or even liquidation of the company. It will strengthen your financial cashflow in situations where you would be temporarily unable to operate your business or pay for damages out of your own resources. And it will pay for legal costs if you have to go to court.

How to choose the right business insurance?

When choosing insurance, be sure to consider the specific risks of your industry and business. A craftsman will have different needs, a carrier will have different needs, and a freelancer or perhaps an e-commerce store owner will deal with a different situation.

Compare quotes from different insurers and focus not only on price but also on the extent of cover, deductibles and, most importantly, exclusions so that you are not unpleasantly surprised in the event of a claim.

Also remember to review your insurance program regularly - especially when you acquire or appreciate property, change the scope of your business, or even enter new markets. Insurance is not a topic that you tackle once and then put out of your mind. To truly act as a "safety net", at the very least, count on annual updates. You can also evaluate whether you have covered all the important risks or whether you are overpaying unnecessarily.

What and why can you insure your business?

You can insure a wide range of areas. So below, we'll look at the main business risk insurances you shouldn't overlook as a self-employed person or business owner.

Property insurance for entrepreneurs

Do you own your own buildings, workshop, shop or even just a nicely furnished office? Property insurance will protect your movable and immovable business assets against a wide range of risks such as fire, natural disasters, theft, vandalism or water damage.

You can insure not only your own belongings or equipment, but also items that you have taken in for repair/modification, storage or legitimate business use (typically leased machinery, borrowed tools or electronics).

Examples of use

• Flood damage to production machinery and premises
• A water main break (e.g. a burst pipe) spoils goods in storage
• A fire starts in a workshop outside working hours

Loss or damage to important equipment, stock, machinery or buildings can lead to a long interruption of business operations. Property insurance can help you reduce the cost of rebuilding them that you would otherwise have to pay out of your own pocket.

Benefits of property insurance

Car and business fleet insurance

When you use company cars for work, it's definitely worth considering comprehensive car insurance. In addition to compulsory third-party liability insurance, which covers damage caused by the operation of the vehicle, you may find it worthwhile to take out breakdown cover, which deals with damage to your own vehicles, and extended assistance or the option to hire a replacement car if necessary.

Examples of use

• A worker causes an accident with a company car
• A parked company vehicle is stolen
• A natural event damages the car (e.g. a branch falls on the bonnet in a storm)

For many businesses, company vehicles are a key tool and their failure or the costs associated with an accident and repair can significantly affect the running of the entire business. When you have multiple cars in your fleet, you can insure them with one bulk policy under fleet insurance. This often gives you better terms and easier administration.

Benefits of fleet insurance

Business interruption insurance

Do you manufacture goods, have employees or a larger business? Think about how much a prolonged business interruption would put you at financial risk. Business interruption insurance typically replaces lost profits and fixed costs in a business when you have to temporarily interrupt everything due to an insured event (such as a flood or fire).

Examples of use

• A restaurant has to be closed for several months after a fire
• A production line is shut down due to water damage
• A business cannot operate after a break-in and damage

Again, one major event can often use up all the financial reserves you have built up in your business. Not only are you dealing with the cost of rebuilding, but at the same time you are missing out on sales. And often banks are not willing to negotiate even a temporary loan in such a situation.

The benefits of business interruption insurance

Operational liability insurance

Liability insurance covers damage you cause to third parties (anyone outside your business or employees) in connection with your business/operations, whether it's bodily injury, property damage or financial loss.

Examples of use

• A construction company damages utilities during excavation work
• A customer slips on your premises and is injured
• A plumber damages a client's property during repairs

With liability insurance, it's often the case that a single major event can threaten your entire financial stability. Damages can run into hundreds of thousands to millions of crowns, especially if there is a lawsuit.

Benefits of liability insurance

Product liability insurance

In addition to business liability insurance, you can also insure yourself for product liability, not only as a manufacturer but also as a seller or distributor.

Similarly, this insurance can also cover work, i.e. defects in the work after it has been completed and handed over.

Examples of use

• A delicatessen company causes dozens of people to suffer food poisoning
• A toy manufacturer puts a product on the market that has a small part that has come loose with a choking hazard
• Mobile phone manufacturer offers device with battery that risks overheating and explosion

If a faulty product causes damage to a consumer (and it is not your negligence), you can claim both compensation and any legal costs from your insurance.

Benefits of product liability insurance

Professional indemnity insurance

Professional indemnity is a specific type of insurance designed for professional service providers. For many professions, this insurance is compulsory by law - typically lawyers, tax advisers, auditors, doctors - but you can also take it out voluntarily.

Examples of use

• An architect makes an error in the project documentation that causes multiple costs
• An accountant gets a tax return wrong and the client incurs a penalty
• An IT consultant proposes a professional solution but causes data loss

The insurance covers your professional error, which can be caused by ignorance or a simple mistake (wrong professional action or advice). Especially for self-employed people, this type of cover can prevent sometimes lifelong debts.

Benefits of professional indemnity insurance

Employers' liability insurance

As an employer, you are liable for damages that may happen to your employees in the course of or in direct connection with the performance of their job duties. While you are legally required to take out this insurance, you are also addressing your responsibility for employee safety, including providing compensation in the event of an accident.

Examples of use

• An employee causes an accident at work while operating a machine
• A worker develops an occupational disease
• A craftsman is injured on a business trip

As soon as you enter into an employment contract with someone, you are automatically obliged to include the employee in your liability insurance on the date of hire. There is no need to take out any special insurance policy, but as an employer you must inform the insurer - either in writing or electronically - that you have taken on a new worker. You already have this obligation from one employee onwards.

Benefits of employers' liability insurance

Employers' liability insurance

Your employees can also have their own liability insurance, either taken out individually or by the company as a group policy. In this case, the insurance covers damage caused to you as an employer - to company property, personal injury or financial loss, including legal costs.

As a standard, the employee is liable to you for damages up to 4.5 times his or her average gross salary. Thanks to insurance, it is possible to increase this limit while saving your subordinates' private funds.

Examples of use

• A worker damages a machine through faulty operation
• A foreman spills on a customer and the customer demands reimbursement for the cleaning bill
• A professional driver causes a traffic accident

Employment practices liability insurance may also cover your contractors or employees. You can also add various other options: for professional drivers, items in transit (including unloading and loading), even possible fines or penalties.

Advantages of employee liability insurance

Other types of business insurance

In this article we have focused on the main types of business insurance, but there are also special products that are often only offered by specific insurance companies, for example:

• Legal expenses insurance,
• cyber risk insurance,
• claims insurance,
• repayment capacity insurance,
• life insurance for the self-employed,
• insurance against bankruptcy of a travel agency or employment agency.

What can we help you with?

For insurance, we recommend that you contact an insurance broker or specialist who will help you to tailor an optimal insurance programme. We can then deal with the rest of the agenda around your business. We will set up a sole proprietorship or your own LLC, provide you with a virtual office and provide complete accounting services.

Contact us using the form below to discuss your business needs together.

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