Insurance 101

Common questions

If you're no legal eagle, then keeping track of legislation can make your brain hurt. And if you're ever embroiled in a legal dispute – whether pursuing or defending a claim – it can be stressful and costly.

Our commercial legal protection can alleviate some of this stress. Covering you for legal costs incurred – solicitors, barristers and expert witnesses for example – you'll also receive day-to-day access to legal advice and tools. Making dealing with complex legalese is that bit easier.

Underwritten by DAS, the market leader in specialist commercial legal protection, our cover includes free access to our expert tax advice helpline, DAS employment manual and DAS BusinessLaw online database. So whenever your brain starts hurting, you'll have help at hand.

Commercial legal protection can be particularly useful for small businesses who have employees but who lack specialist legal expertise in-house.

It is sold as an added benefit to any of our policies, providing peace of mind that you have legal support whenever you need it.

What are the risks

What if a former employee claims they were dismissed without the correct disciplinary procedures? Or HMRC finds financial irregularities in your tax return?

It's inevitable that most companies will require some kind of legal council at some stage. If and when you do, you'll want to know that you're covered.

Things you can do

With legal expertise on hand it's much easier to avoid expensive claims – helping you to dot the i's and cross the t's in all your business interactions.

To reduce the risk even further try to stay up-to-date with the laws and regulations affecting your business. And if you're not sure – ask! Nobody can be an expert in everything, so seek specialist help if you need it.

Things to watch out for

Our commercial legal can only be bought alongside another business policy, such as public liability insurance, professional indemnity insurance or employers liability insurance. It cannot be bought on its own.

Also bear in mind that it won't cover your business for compensation costs resulting from a claim against you, so you may need additional cover for this.

What is contents and equipment insurance?

As the name suggests, this cover has two parts. Contents and equipment insurance covers everything in the office, including your fit-out, computers, office equipment, furniture and documents.

Meanwhile, portable equipment insurance covers everything you take out and about with you. So that means laptops, mobiles, cameras and tablets.

It is an 'all risks' policy, so everything is covered for accidental physical, malicious damage, fire, theft and flood. This even extends to items you own, or that you're responsible for, while they're on your premises.

Who is contents and equipment insurance for

Whether you're a freelancer working at home on a single laptop or a multinational corporation, the loss of your office essentials can cause significant disruption to your business. That's why Digital Risks has cover to suit businesses of all shapes and sizes and with all sorts of business equipment.

What are the risks

Your gadgets and equipment are the fabric of your business. But what if something happens to that valuable technology? Could you continue with no smartphone, laptop, tablet?

What about everything else your business relies on – furniture, filing cabinets, coffee machine. Could your business continue if it was damaged or destroyed?

With your customers expecting fast, efficient service, just a few days of downtime can cause problems. Plus the costs of replacing your belongings can quickly add up.

Things you can do

If you're in a co-working or shared office space, you must make sure your office equipment is securely locked while unattended. A Kensington lock is often a good option for your laptops and monitors. Putting other valuables in a lockable desk draw keeps them safe and removes temptation from those less honourable than yourself.

Things to watch out for

When choosing your cover limits, make sure you consider the replacement value rather than the market value. You should also consider items that are leased.

If you're in rented premises, you may want to check with the landlord to see what is already covered through their insurance.

What is cyber security (or cyber liability) insurance?

Bad news first. As a digital business you're a prime candidate for data breaches and cyber-attacks. As an innovator, you need to be even more vigilant. If the worst does happen, it can have serious repercussions for your reputation, your clients' businesses, not to mention the cost of any legal fees, compensation claims and notifying those affected. It doesn't bear thinking about.

Now for the good news. Cyber security insurance will come to your rescue.

Covering you for breach of data protection laws (where insurable by law) and your liability for handling data, cyber liability insurance can also provide cover for extortion, system rectification costs, plus PR expenses and financial loss due to system downtime.

Who is cyber liability insurance for

Firstly, even if you're not 'in the cloud' or get 'big data', read on.

Few businesses can get by today without some form of technology, whether it's a website, data servers or basic online software. Even with a small IT footprint, cyber-attacks can still be a risk.

And if you're one of those whose whole world is 'in the cloud', your risk could be even greater.

What are the risks

Data breaches and hacking are big news, with frequent reports showing the damage they can do to business reputations, customer trust and the bottom line.

And it isn't just big businesses affected.

You also have data protection laws to think about, with penalties of up to £500,000 if your business fails to comply with the Data Protection Act.

The extent of your risk depends on the number and type of records you hold, along with the network security and backup measures you have in place.

The origin of data can also be an issue, as different data protection regulations apply to most overseas jurisdictions.

Things you can do

Keep track of the data you hold and if you don't need it, delete it. Anonymising personal information is another good way of staying protected.

If your data still lives in excel spreadsheets, then consider updating your systems. There might be a solution that not only provides security but also improves efficiency and productivity. Carefully vet all suppliers first, of course.

Finally, if you're not sure then seek professional advice – not everyone knows the latest encryption practices!

Things to watch out for

Cyber insurance is closely linked to professional indemnity insurance, so make sure your provider has a good technical understanding of how they work together.

Note that when you take out a cyber liability insurance policy, you will need to disclose the type of data you're holding. This is particularly important for financial information.

Also consult your policy if anything changes in your business, as this may affect its validity. Disclose things that change ASAP – even before they happen.

Read "Your Ultimate Guide to Cyber Security Insurance."

What is management liability insurance (also known as directors and officers insurance)?

First class travel, power meetings, hob-nobbing with clients – there are perks to being a director. But it can also be a tough gig. Employees, customers, shareholders, regulators – they all rely on you. They put their trust in you to act responsibly.

Of course you do the utmost to carry out your role with care and attention. But, if something does go wrong on your watch, being a director means you could face a claim for personal liability.

This is where management liability insurance – sometimes called management liability or D&O for short – can help. It covers your personal liability for any mistakes or omissions while a company director, including any defence costs and awards made against you.

Who is management liability insurance for

If your directors have legal or regulatory responsibilities to employees, the public, regulators, investors or other directors, then you should consider management liability insurance. It is particularly important for directors of publicly listed companies and those seeking investment. Investors often ask for this insurance so getting it sorted early shows you take your responsibilities seriously.

What are the risks

Claims can cover numerous issues, whether breaching health and safety laws, misadministration of the company pension or errors in financial reporting – particularly where the individual has acted outside the authority of the company.

Even if you've done nothing wrong, the impact of a claim like this can be catastrophic. You'll be personally liable for any fines, compensation and defence costs, not to mention any criminal investigations. So it makes sense to cover your back with directors and officers insurance.

Things you can do

A personal liability claim isn't something anybody wants to face. Which means avoiding a claim in the first place is your best defence.

As a director, take time to understand all the laws and regulations that affect you and your business, making sure you're on top of everything. And if you don't personally have the time or expertise to do this, then consult specialist advice – it will be worth it in the long-run.

Things to watch out for

It's important to remember that management liability insurance only covers individual directors and officers, not the business itself. You may also need public liability insurance and professional indemnity insurance to protect the company as a whole.

Also bear in mind that the legal term 'officer' is broad, with the potential to cover numerous individuals in management or supervisory positions. So have a think about who else may be at risk of a potential claim and have them covered too.

Read the "Ultimate Guide to Fintech & Startup Insurance."

What is employers liability insurance?

If your team is as important as ours, you'll already be looking out for their safety and wellbeing. But you can't control everything. If one of your employees suffers an illness or injury as a result of the work they're doing for you, your business could be liable.

Well fear not, employers liability insurance cover can ease some of those sleepless nights. If an employee makes a claim against you for illness or injuries sustained at work, you'll be covered for the fallout. That includes legal expenses and compensation.

You'll also avoid paying potentially expensive fines to the Health and Safety Executive, whose job it is to ensure you fulfil your responsibility as an employer.

Who is employers liability insurance for

There's no getting away from it. If you are a UK business with one or more employees (other than public organisations) then employers' liability insurance is a legal requirement.

It's not just permanent employees either. If you employ contractors, casual, temporary or part-time staff, you also need cover. The only exceptions are immediate family members and employees working abroad – although the latter may be covered under similar laws where they are based.

What are the risks

Employees can claim for any number of reasons. Whether breaking an ankle tripping over a cable, suffering eye strain from computer use,or stress from a high pressure environment.

It is also becoming easier to claim, with the rise of 'no win no fee' legal services and the so-called compensation culture. Any damages and legal expenses could seriously set your business back, not to mention any damage to your professional reputation.

Things you can do

Staying on top of workplace health and safety is a great start, helping you avoid any accidents and injuries before it's too late. The Health and Safety Executive is the oracle of advice and regulation on this subject, so consult its website to find out what you need to be aware of and how to assess the risks.

Things to watch out for

If you employ staff and don't have employers liability insurance, you could be fined £2,500 for each day you don't have it. Your EL certificate must be displayed – either on your premises or online – and be made available to inspectors. Failure to do so could result in a £1,000 fine.

Read the "Ultimate Guide to Fintech & Startup Insurance."

What is media liability insurance?

Websites, blogs, social media – they're part and parcel of business today. But the sheer proliferation of media means the chance of making a mistake is greater than ever. And if that happens, your business could be liable.

Media liability insurance – sometimes called errors and omissions or E&O for short – protects you for negligence in your own media content and advertising, including websites, blogs and social media. So you can rest easy knowing if that post backfires, any legal fees and compensation costs will be covered.

Our E&O is designed for the unique needs of media and technology businesses, protecting you for infringement of intellectual property, breach of confidentiality or right to privacy, and breach of comparative advertising regulations.

Who is media liability insurance for

In one way or another, almost all digital businesses are producing and broadcasting or publishing media content. Just by using a blog, Twitter, Facebook or YouTube account, your business could face claims for slander, breach of copyright or making false or misleading statements.

If you're a media producer, broadcaster, distributor or publisher then media liability insurance is essential.

What are the risks

Hardly a week goes by without another social media or advertising #fail hitting the headlines. It's perhaps not surprising that libel actions linked to Facebook and Twitter posts continue to rise.

But social media isn't the only risk. What if a competitor alleges that you make unfair comparisons to their product on your website? Or you accidentally used a stock image without a license? Your business could be required to pay compensation, incurring heavy legal costs along the way.

Things you can do

Even with D&O protection, avoiding a claim in the first place is your best defence. Nobody wants to face the stress and reputational damage of the law courts.

So make sure you have comprehensive approval processes in place for all media content. It should be checked and double-checked before going live. Social media guidelines can also be useful to ensure all employees know the rules and what to look out for.

Read the "Ultimate Guide to Fintech & Startup Insurance."

What is professional indemnity insurance?

If a client suffers – or claims to suffer – financial or reputational damage as a result of your advice, your business could face legal action. Even if you've done nothing wrong, the cost of defending yourself can be eye-watering.

This is where professional indemnity insurance – or PI for short – comes in. If a client or former client makes a claim against your business PI picks up the bill. That includes legal costs and any compensation.

Sometimes known as professional liability insurance, don't confuse PI insurance with public liability insurance, which covers your business against accidents and injury to the public. Professional indemnity insurance is different, covering you for financial, sales or reputational damage that could result from your professional services.

Who is professional indemnity cover for?

If your business gives advice, consultancy, offers a professional service, or handles data or intellectual property belonging to your clients, you may need PI. It can be particularly relevant for PR and marketing consultants, designers, IT consultants and web developers, amongst others.

As well as protecting your business against claims, professional indemnity also has a role in helping you win or retain clients, with many companies now insisting that their suppliers have it.

What are the risks

Everything looks rosy when you win that new client, but what if things turn sour? If the project doesn't go as planned, they could allege you breached the contract.

Or if an employee accidentally sends sensitive information to the wrong client? Again, you could be liable, with legal fees and compensation to deal with.

Things you can do

Check that your suppliers and contractors also have professional indemnity insurance, particularly those whose work directly impacts your clients. Having professional agreements in place with suppliers is also a must, so if anything goes wrong with their part of the job, you may be able to hold them liable.

You can reduce your own exposure through internal checks and systems, ensuring you're consistently delivering quality work. And always have your customer contracts and website T&C's legally reviewed.

What to watch out for

You must correctly declare your business activities to your insurer,updating them if anything changes. This is particularly important if you have customers in the USA or provide legal, financial or medical services, where you may require specialist advice.

When choosing a level of cover, think about the potential financial impact if things went pear-shaped with a client. Some clients will request a certain limit but you should also consider expensive legal costs in addition, and the possibility of multiple claims in the same period.

Read "Ultimate Guide to Fintech & Startup Insurance."
Read "Do I need professional indemnity insurance?"

What is public liability insurance?

A momentary slip, a lapse in concentration. It can all go wrong in an instant. Life sometimes derails things for us. But if in a moment of clumsiness, you or any of your employees cause harm to a member of the public, you could be facing a law suit. And if that happens, public liability insurance could save you a lot of time, money and hassle.

It's very simple. If your business causes an injury or property damage to a member of the public – that includes clients, suppliers, contractors or anybody else not employed by you – public liability insurance will cover you for any resulting legal and compensation costs. Leaving you to keep doing what you do best.

Who is public liability insurance for

Public liability insurance is important for all businesses, freelancers included. Accidents can happen to any business – big, small, online, offline, even those that are changing the world! And the costs of dealing with the fallout can be equally devastating.
In fact, many companies now insist that their suppliers have public liability cover. So you could also be at a competitive disadvantage if you don't.

What are the risks

Picture a scene. You're out filming your latest vox pops when disaster! Your budding Stephen Spielberg isn't concentrating and accidentally trips up an innocent bystander. She's on the floor, phones are flying and you've got a lawsuit on your hands.

It only takes an allegation that you've done something wrong and 'no win no fee' services can make it easy to claim against you. If that happens, the legal fees and any compensation can be crippling.

Even if you don't have visitors to your office, you or your employees could cause injury or damage when visiting a client, at an industry event, or while filming vox pops! So consider when you could be at risk.

Things you can do

As with employers liability insurance, staying on top of health and safety is a good place to start. If you have teams that go out of the office to events or filming, make sure they're clued up on keeping things safe for the public.

Also make sure you have a good response plan in place to deal with the initial fallout. Then once that's under control, call your insurer. And don't admit fault or liability until you've spoken with them.

Things to watch out for

Some of your clients, or even suppliers, might ask you to have public liability insurance, so make sure your minimum cover limit meets their requirements as well as your own. Some bigger clients, particularly government contracts, could request a minimum of £5 million or even £10 million in cover.

You should also check you're covered for the right things, particularly if your business is not purely office-based. If your employees work at heights for example, that is important to declare.

Read the "Ultimate Guide to Fintech & Startup Insurance."

What's the difference between jurisdictional and geographical limits?

Whatever your business, client contracts are your first line of defence against potential legal claims and disputes. Not only do they protect the rights of you and your customers, giving you both certainty and peace of mind, they also set out which laws apply if anything goes wrong. So, while it may not be the most exciting part of your job, it's vital to get it right. Here's some of the key contract jargon to be familiar with and how it relates to your insurance policy:

Jurisdiction

Client contracts should contain a jurisdiction clause, which determines where any associated legal claims would be heard. This clause is important because it allows you to avoid certain countries' courts if you wish, and without it, you could face an expensive and time-consuming dispute over where any claims should be handled. It also avoids the risk of multiple claims happening in different countries at the same time.

The jurisdiction can also be either "exclusive" or "non-exclusive". Generally speaking, "exclusive" means that only the specified courts will be able to hear disputes and "non-exclusive" means the specified courts have jurisdiction to hear disputes but the parties aren't prevented from litigating in other courts instead (or as well).

Governing law

Likewise, it's sensible to specify which set of laws govern your contracts. Governing law is the law that will be applied in claims relating to that contract. The governing law and jurisdiction don't have to be the same; therefore, your contract should specify both the governing law and jurisdiction.

As with jurisdiction, if you don't specify which law governs your contract, you could face an unnecessary dispute about which set of laws should be used to interpret it.

What does "jurisdictional limit" mean?

You probably won't be surprised to hear that legal costs and damages across the pond can be much higher than in the UK. As a result, insurance companies often avoid exposure to legal claims in North America by limiting where their cover applies. This also benefits customers without North American exposure by enabling them to pay lower premiums.

So, if the jurisdictional limit of your insurance policy is "worldwide excluding USA and Canada", it means the policy won't cover claims brought in courts in the USA or Canada, or claims relating to contracts governed by their laws. Likewise, if the jurisdictional limit of your policy is "United Kingdom", then the policy will only cover claims brought in courts in the UK and under contracts governed by its laws.

What does "geographical limit" mean?

Most insurance policies also have a separate "geographical limit" (sometimes called "territorial limit") which can be used to exclude claims relating to work carried out in certain locations. For example, if the geographical limit of your policy is "European Union", it means the policy won't cover work you do for clients outside the EU.

A geographical limit can also be used to broaden your cover without increasing exposure to certain jurisdictions. So, for example, if the jurisdictional limit of your policy is "worldwide excluding USA and Canada", but the geographical limit is "worldwide", it generally means that you're covered for work you do for clients anywhere in the world - you're just not covered for claims which are brought in courts in the USA or Canada, or under contracts governed by the laws of the USA or Canada.

To give you an example, imagine a Software as a Service (SaaS) business in the UK, with subscribers worldwide (including USA and Canada), but with terms and conditions governed by the laws of England and Wales, and exclusive jurisdiction in England. In this case, the SaaS business may be satisfied that USA and Canadian jurisdictional limit isn't required, provided that the geographical limit is worldwide.

Another example could be an advertising agency in the UK with a client headquartered in New York. If their contract is governed by the laws of England and Wales, and exclusive jurisdiction in England, then the agency may be comfortable with the jurisdictional limit excluding the USA, so long as it is included in the geographical limit. Alternatively, If the contract was governed by the laws or jurisdiction of the State of New York, then the agency would need the jurisdictional limit to include the USA.

Read "Ultimate Guide to Startup Insurance."