A single business insurance policy is not one promise, it is several, each written to respond to a different kind of loss and each carrying its own conditions and exclusions. When something goes wrong, the question is never simply whether the business is insured. It is whether this specific loss falls inside this specific section of the wording, and whether the business met the conditions attached to it. This guide works through the covers you are most likely to hold, one at a time, using a real cited claim for each to show where the promise held and where it did not.

Why the covers don't overlap the way most people assume

Public liability responds when your business injures a member of the public or damages their property. It does not respond when your own employee is hurt, because that loss sits under employers' liability instead. Professional indemnity responds to a claim that your advice or your service was defective. It does not respond to a claim that a product you made was defective, because that sits under product liability. Each cover is drawn narrowly on purpose, and a claim that lands on the wrong side of that line is often refused for reasons that have nothing to do with whether the business was at fault.

The three groups this guide works through

• Compulsory covers: employers' liability, required by the Employers' Liability (Compulsory Insurance) Act 1969 at a minimum of £5 million (most policies are written well above that floor, commonly £10 million or more), and motor insurance under the Road Traffic Act 1988. These are not optional based on your own risk assessment.
• Liability covers: public liability, product liability and professional indemnity, each explained through the claim that shows what it pays and what it was never written to pay.
• Property and interruption covers: business interruption, contents and stock, plant and equipment, and cyber, including the indemnity period trap that the Supreme Court's ruling in FCA v Arch Insurance (UK) Ltd and others [2021] UKSC 1 made visible.

How each section is built

Every cover below starts with a real claim. The rule that decided the claim follows, cited to its statute or its wording. What a business should watch for in its own policy comes last, because that is the part a reader can actually act on.

Terms used once and left unexplained here are defined in full in The Small Print, Translated. Full write-ups of individual claims, including the ones referenced across this guide, sit in the Claims Story Library. For the pricing side of the same covers, the companion piece on how an underwriter quotes a business insurance policy explains what pushes a premium up or down for each one.

Two covers are not a matter of choice for most businesses. Employers' liability insurance and motor insurance are set by statute, and trading without either is a criminal offence.

Employers' liability: what the 1969 Act requires

The Employers' Liability (Compulsory Insurance) Act 1969 requires almost every business with employees to hold cover against claims from staff injured or made ill by their work. The Act sets a floor of £5 million, but most policies in the market are written at £10 million or more, because a serious workplace injury claim, including future loss of earnings and long-term care, can exceed the statutory minimum on its own.

Trading without this cover is not a gap you discover later at claim stage. It is an offence at the point you employ someone without it, and the Health and Safety Executive can fine a business for each day it goes uninsured. The claim story of the builder who had no employers' liability insurance shows what that looks like in practice: an injured worker with a genuine claim, and a business owner facing it personally.

Motor insurance: what the Road Traffic Act 1988 requires

Any vehicle used on the road for business, whether it is a fleet of vans or a single car used to visit clients, needs cover that meets the Road Traffic Act 1988. The minimum is third-party cover: it pays for injury to other people and damage to their property, not for damage to your own vehicle. A personal car policy taken out for commuting does not automatically extend to business use, and using one for deliveries or site visits without telling the insurer can leave the driver uninsured in the eyes of the law even while a policy document exists.

Driving without the required cover carries penalty points, a fine, and the possibility of the vehicle being seized. For a business that depends on that vehicle to trade, the practical cost of being off the road often outweighs the fine itself.

Why compulsory is different from advisable

Other covers on this page, such as public liability or professional indemnity, are matters of judgement: what a business chooses to carry against the risks it runs. Employers' liability and motor insurance are not judgement calls. The law names the minimum, and falling short of it is an offence whether or not a claim ever arises. The distinction matters when a business is deciding where to spend a limited insurance budget: these two covers come first because the alternative is not legal.

For the precise wording of either statute, see the Employers' Liability (Compulsory Insurance) Act 1969 and the Road Traffic Act 1988 on legislation.gov.uk. The glossary sets out related terms such as excess and indemnity period in plain language, and the guides section covers how these compulsory limits interact with the liability covers that follow.

Liability cover responds when someone outside the business, a customer, a member of the public, a client, says the business caused them harm and wants compensating for it. The three liability covers split by who is harmed and how: a visitor injured on the premises, a product that fails once it has left the shop, or advice that turns out to be wrong. Each pays a different claim and each excludes the other two, which is where businesses that hold only one find the gap.

Public liability

Public liability pays out when a third party, someone who is not an employee, is injured or has property damaged because of how the business operates. A customer who slips on a wet floor left unmarked in a shop, or a delivery driver hurt by badly stacked stock in a warehouse, is the kind of claim this cover exists for. It does not cover injury to the business's own staff, which sits under employers' liability instead, and it does not cover a fault in something the business made or sold, which is product liability's territory.

Product liability

Product liability pays when a product causes injury or damage after it has left the business's control, whether the business manufactured it, assembled it, or simply sold it on. A retailer can carry product liability exposure for goods it did not make itself, because the claim can be brought against whoever supplied the product. Cover here is usually written with an aggregate limit, a single cap on what the insurer will pay across all claims in the policy year.

Professional indemnity

Professional indemnity pays when a client suffers a financial loss because of advice given or a service performed. An accountant, a consultant, a designer, an architect: anyone whose work a client relies on for a decision can be exposed to this kind of claim even where nothing was broken and no one was hurt. The claim story of the accountant who notified an insurer two months after learning of a potential claim shows how this cover actually operates: professional indemnity is typically written on a claims-made basis, meaning the policy in force when the claim is notified responds, and prompt notification is usually a condition precedent, a term that must be satisfied before cover applies at all.

The terms that decide these claims, aggregate limit, claims-made basis, condition precedent, are worth knowing precisely rather than approximately, and the glossary sets them out in plain language: The Small Print, Translated. The full picture of how these three covers sit alongside the compulsory covers and the property covers is mapped in the guide on Business Insurance Guides, and the accountant's case is worth reading in full at The Accountant Who Notified Two Months Late.

Property and interruption cover deals with two separate losses that often arrive together: the damage to what a business owns, and the income it loses while that damage is being put right. Insurers write these as separate sections of the same policy, and a business that reads only the property section usually finds the gap in the wrong place, mid-claim, when it is too late to fix.

Business interruption: cover for lost income

Business interruption cover does not pay for the fire, the flood or the burst pipe. It pays for the revenue the business would have earned had that damage not happened, for a defined period after the event. That period is called the indemnity period, and it is the clause most likely to disappoint a policyholder who assumed cover simply ran until things were back to normal.

An indemnity period of twelve months sounds like a year of protection. It is in fact a deadline: the insurer pays lost income for twelve months from the date of the damage, whatever state the rebuild is in when that period ends. If the building takes fourteen months to reinstate, because of planning delays, contractor availability or the scale of the works, the last two months of lost trade fall to the business.

The Supreme Court's decision in FCA v Arch Insurance (UK) Ltd and others [2021] UKSC 1 is often cited as having settled how business interruption cover responds to disruption. It did not. The case dealt specifically with disease and prevention of access wordings, the clauses some policies used to respond to government-ordered closures, and it clarified what those particular wordings meant. It said nothing about indemnity periods, nothing about standard material damage cover, and nothing about business interruption claims that follow a fire, a flood or a break-in. One claim story on this site, The Restaurant That Was Flooded Twice, and Paid Once, shows how an indemnity period and a reinstatement clause interact when the damage is physical rather than regulatory.

Contents and stock: cover for what is on the premises

Contents and stock cover responds to the physical loss of goods, fixtures, fittings and stock held on the premises, whether that loss comes from fire, flood, theft or escape of water. The sum insured is set by the business, not the insurer, and this is where average becomes relevant: if the declared sum insured is lower than the actual value at risk, most policies reduce the claim payment by the same proportion the business is underinsured. A shop that insures £100,000 of stock when it actually holds £200,000 is insuring half its real exposure, and a partial loss is settled at half its value.

Plant and equipment: cover for the tools of the trade

Plant and equipment cover sits alongside contents and stock but insures a different category of asset: the machinery, vehicles off the road, tools and fixed equipment a business needs to operate. Reinstatement value settles a claim on the cost of replacing the item new, while an indemnity basis deducts wear and tear. The difference between the two is frequently the difference between a claim that covers full replacement and one that leaves the business to fund the shortfall itself, so it is worth checking which basis the schedule actually states.

Cyber cover: a newer answer to a newer loss

Cyber cover responds to losses that property and interruption cover were never built to reach: a ransomware attack that locks a business out of its own systems, a data breach that triggers notification duties, or business interruption caused by an IT failure. Many standard property policies exclude loss arising from a cyber incident outright, which means a business relying on its material damage and business interruption cover to catch a systems failure may find nothing there to catch it.

Terms like indemnity period, average and reinstatement value recur across every section of a policy schedule, and the glossary sets out what each one means in the policy wording. For a worked look at how an indemnity period gap plays out in practice, the interactive tools page includes scenarios that show the arithmetic.