SME insurance – what is it and how does it work?
From shops and catering companies to plumbers and joiners, SME insurance aims to protect entrepreneurs against financial risks.
Explore the common insurance requirements for an SME business with Hiscox. Our frequently asked questions offer bite-sized definitions to point you in the right direction.
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What is SME insurance?
SME insurance describes a series of products that seek to help protect small and medium-sized businesses (SMEs) from financial risk or operational problems. For example, some policies provide cover against negligence claims, while others focus on cyber security or damage to property. It’s all about finding a business insurance policy – or policies – that match your company’s unique needs.
What does SME stand for in insurance?
SME stands for small to medium-sized enterprise, in the insurance world and beyond. These account for more than nine in 10 UK businesses . SMEs fall into various categories. For example, they can be structured as sole traders, limited companies or partnerships. And they cover everything from retail, catering and hospitality through to construction, marketing and IT.
Why is SME insurance important?
SME insurance could prove important in helping to defend your business from financial vulnerabilities. Small and medium-sized firms have much tighter budgets than large corporations. That means legal fees or compensation claims might leave you with major financial headaches – or even jeopardise your future.
For instance, if your SME faces a break-in, lost stock and premises damage can come with a price tag. Commercial property and business contents insurance could help to set things right.
Likewise, if your client complains about your professional advice, they might try to sue you for thousands of pounds in compensation. Professional indemnity insurance could help to bolster your business against the impact.
SME insurance products are designed to relieve the burden by helping to cover unexpected costs.
What insurance do I need for a small business in the UK?
Employers’ liability (EL) cover is usually an essential type of insurance for any SME business that has staff members. It deals with compensation payouts if employees fall ill or are injured as a result of their work. EL insurance is usually a legal requirement (external link), with fines for non-compliance.
SMEs also legally require commercial motor insurance if they use company vehicles. You might also find that clients or trade bodies ask for professional indemnity insurance, too, before any work begins. For example, the professional bodies for accountants and surveyors require members to have PI. This can help to protect you against negligence claims.
What are some SME insurance products to consider?
Thinking about your size, sector and business model can help you find the right SME insurance products. Employers’ liability is often mandatory and public liability commonly purchased by businesses of this size, so many SMEs consider these first.
Public liability insurance helps to handle legal and compensation fees if your work ends up harming an individual, or damaging their property. Other products are available to suit different types of SME.
GOV.UK, "Business population estimates for the UK and regions 2022: statistical release".https://www.gov.uk/government/statistics/business-population-estimates-2022/business-population-estimates-for-the-uk-and-regions-2022-statistical-release-html.
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