My business is entirely digital and I work from home on my laptop – do I still need insurance?

Question:

I am in the process of creating an online business, which will sell web-hosting, training and advertising.

All of the products available will be digital and there are no physical products. Because all trading will be completed online, I will not need to visit customers and I will not have the need for people to visit me.

I will work from home, although all I need is my laptop and a filing cabinet – so is it still classed as using my home as a workplace? I can, and indeed will, complete much of my work while on the go, i.e. at friend’s houses, my partner’s house or in coffee shops and cafes.

What type of insurance do I need to cover my business legally?

– Startups.co.uk reader

Answer:

You’re asking about legally required cover, and that is a very easy one to answer.

There are only two covers the law will ever demand of your business.

The first is Employers’ Liability Insurance, and the second is motor insurance, which applies to everyone whether they run a business or not.

As you’re working on your own, you won’t need to think about Employers’ Liability Insurance as yet. I would bear in mind, however, that people mostly buy insurance because they want it, rather than because the law tells them to get it.

Home insurance isn’t compulsory, for example, but few people would sleep easy at night without it.

On that note, there are two points worth considering for a business like yours:

You are providing a service to humans.

You’re not manufacturing a physical product, but people do still depend on the integrity of your services, and could suffer if something goes wrong. For example, your business is hosting other people’s websites and advertising (upon which their business revenue may rely). You also mentioned training: your customers are likely to act on your advice and guidance as a result, which does put a responsibility onto you too.

Professional Indemnity Insurance is the relevant cover here. It protects you in the event of a whole host of ‘virtual’ mistakes and slip-ups. These include situations where:

• Confidential client data is lost, stolen or just emailed out to the wrong person by accident.
• If a mistake in advertising copy or a spreadsheet (say, a missing ‘0’ in a price) means a client loses money.
• If someone acts on your advice and ends up suffering financially or in another way as a result.
• If a photograph you use in advertising is wrongly attributed and the photographer sues you.

Running your business from a laptop.

If you run your business from your home in any capacity it’s a good idea to let your home insurer know, as not informing them can invalidate your home insurance.

I’d also say that working in public places – like cafes, coffee shops or even other people’s properties – carries its own risk. If someone trips over your laptop cable in a café, it is your business that would pick up any claims, not the café owner’s policy.

Public liability insurance would cover you wherever you conduct your business activities.

Likewise, make sure your laptop (and other devices) you are using are covered for business use under your home insurance or business insurance too. If a member of the public in a café knocks over a cup of coffee over your laptop, it would be hard to get compensation from them. Your laptop is your business – so protect it to the hilt!

Some of the above situations may sound over the top, but after twenty years of seeing business insurance claims, I know that silly incidents like this can cause big trouble to a business owner.

To put it into perspective, one of the worst injuries I have seen in my underwriting career involved someone standing on a chair to water a plant in an office…

I’ll leave you with some final thoughts on Employer’s Liability Insurance – while you may not need it now, it’s good to be aware of a few pitfalls if you do hire in help later on.

Many people assume Employer’s Liability Insurance is only needed for the traditional employee relationship – where you have a permanent contract, they are on PAYE, etc. Be careful thought as it does apply to more casual arrangements too: apprentices, interns, part-timers or project staff.

It even applies to people you may consider ‘freelancers’, if, for example, they work entirely for you or you supply their equipment.

Check that last one carefully! – Gerry Donnachie, AXA Business Insurance

If you’d like to discuss your business insurance case in more detail, you can call AXA’s advisers on 0330 159 1520 or get more information at www.axa.co.uk/insurance/business.

The HSE website also have detailed guidance on who they consider an employee for the purposes of Employers’ Liability Insurance when you cross that bridge too.