The five risks a small business ignores, and how to cover them

Ask a small business owner what they’ve insured and the answer is almost always “the building and the equipment”. That’s reasonable, but a fire gets repaired. The risks that close businesses are less visible.

1. Business interruption

After a serious loss, the building will be rebuilt, but for three or six months the revenue stops. Salaries, rent and instalments keep running. Loss of profits cover replaces the gap until full recovery. Statistically, it’s the most important cover that’s missing.

2. Liability

A customer slips in your shop. A product you sold causes damage. An employee of yours makes a mistake affecting a client. General and professional liability covers the compensation and the legal defence costs, which are often the largest expense, even if you’re cleared.

3. Cyber

Ransomware that locks the till and the customer records. A breach of the e-shop. Fraud with a fake supplier email. For a small business, such an incident can mean days offline, GDPR fines and lost trust. Cyber cover funds the technical recovery, the legal support and the crisis management.

4. Trade credit insurance

If you sell on credit, one large customer who goes bust or doesn’t pay can drag you down with them. Trade credit insurance protects your receivables against insolvency and prolonged non-payment, critical especially in wholesale.

5. The key person

In many small businesses, one or two people hold the client relationships, the knowledge and the operation. If a partner or key executive is suddenly lost, a management and liquidity gap opens and, if it’s a partner, a question of buying out their share. Key-person insurance gives the business capital and time to carry on smoothly.

How to approach it

You don’t need everything. You need a short assessment: which risks, if they happened, would stop you, and which are merely annoying. You insure the first properly and accept the second as tolerable risk.