Insurance for a new business: what you need, and when

The three questions that decide what you need

Do you give advice, design or a professional opinion? If a client could lose money because your work was wrong, that is professional indemnity territory. It covers the cost of defending the allegation and of putting the loss right, up to the limit you buy.

Do you go to other people’s premises, or do they come to yours? If someone could be injured or their property damaged in the course of what you do, that is public liability. Site visits, surveys, inspections, client offices, exhibitions, workshops.

Will you employ anyone, including on a casual basis? Employers’ liability is a legal requirement for almost every UK employer under the Employers’ Liability (Compulsory Insurance) Act 1969. Sole directors with no other staff are usually exempt, but the exemption is narrower than people assume — it turns on whether anyone works under your control, not on job titles.

Most new professional firms end up with the first two. Whether you need the third depends entirely on whether anyone else works for you.

Why “we have not traded yet” is not a problem

It is a common worry and it is misplaced. Underwriters write new businesses every day. What they need in place of a trading history is the story behind the business: how long you have been doing this work, where you did it, whether it was covered by someone else’s policy, and whether any claim or complaint has ever attached to you personally. A chartered engineer leaving a Tier 1 contractor to set up alone is not an unknown quantity — they are a known quantity with a new company number.

What does cause friction is being asked for figures that cannot exist. If a proposal form demands last year’s turnover, your five largest projects of the past six years and last year’s staff numbers, a genuinely new business has no way through it. That is a form design failure, not a sign that you are uninsurable. Ours now asks new businesses a different set of questions.

Get the cover before the work, not after it

Professional indemnity is written on a claims-made basis. It responds to claims made against you while the policy is in force, not to work done while it was in force. If you complete a job in March, have no policy, and a claim arrives in September, buying cover in October does not help you. The corollary is that the policy needs to start before your first piece of chargeable work, and needs to keep running — through renewals, and afterwards through run-off — for as long as someone could still bring a claim.

Public liability works differently. It responds to injury or damage that occurs during the period of cover, so it needs to be live on the day you set foot on site.

Practically: arrange cover to start on or before the date you begin trading. If you have a start date but no signed contracts yet, that is fine and normal. Say so on the form.

What a client or contract may require

Plenty of new firms buy cover because a client insists rather than because they have weighed the risk. Both are legitimate reasons. What matters is that the contract requirement and the policy actually match. Read the clause: it will usually specify a class of cover, a minimum limit of indemnity, and sometimes a requirement to maintain it for a period after the work ends. A £1m requirement met with a £1m policy that lapses the month after completion does not satisfy a clause requiring six years of continuing cover.

Where a profession has a regulator, the regulator may set the floor instead. Solicitors, accountants, architects and financial advisers all work to minimum terms or minimum limits set by their professional body, and those override whatever a client asks for.

What you need before you can get a quote

Less than you would think. For a new business it is usually: what the business will do, who for, what you expect to earn in the first twelve months, where you and your colleagues did this work before, what qualifications you hold, and whether anything has ever gone wrong. The full list is here, with the reasoning behind each item.

By profession

The general principles above are the same everywhere. What changes is the wording, the regulator, and what an underwriter will want to see. Guides for the professions we place most often:

New engineering consultancy · New architecture practice · New surveying practice · New accountancy practice · New law firm · New consultancy · New IT or software business · New design and build contractor · New financial adviser firm

Frequently asked questions

Can I get insurance before the company starts trading?

Yes, and for professional indemnity you generally should. Cover can be arranged to begin on a future date, so you can have the policy in place before your first piece of chargeable work. Tell the insurer your intended start date rather than leaving it blank.

Do I need turnover figures to get a quote as a new business?

You need an estimate of what you expect to earn in your first twelve months, not historic accounts. A range is fine. If the estimate turns out to be materially wrong, tell your broker — most policies adjust rather than fail.

I am a sole director with no employees. Do I need employers’ liability?

Usually not, while that remains true. The exemption for a company employing only its owner is narrow, and it stops applying the moment anyone else works under your direction, including casual help and some subcontractors. Check before you take anyone on.

Does a claim from my last job follow me to my new company?

It can. Claims attach to the person as well as the entity, and an underwriter will ask about anything that arose in previous employment or practice. Disclose it. A disclosed claim is a rating factor; an undisclosed one is a coverage problem.

What if my previous employer’s policy covered the work I did there?

That policy covers the work done for that employer, and only while it or its run-off remains in force. It does not follow you. Your new company needs its own cover for its own work.

How much cover should a new business buy?

Start with what your contracts and your regulator require, then consider what a realistic worst-case claim against you would cost to defend and settle. The defence costs alone are often the larger half.

Related reading: What you need to get a quote · Cover before you start trading · PI vs public liability · What drives the price

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.