You will find below an explanation of the different types of insurance available for your business, as well as tips on how to ensure you declare the correct values and avoid underinsurance.
We have not included any guidance regarding Motor Insurance, as it is a legal requirement for your motor vehicles to be insured for Third Party risks. If you would like additional information on this type of cover, please contact our advisors.
As Removal and Storage contractor or Self Storage Operator, it is best practice for you to purchase adequate Customers’ Goods insurance. Our advisors provide bespoke solutions for our clients so it is recommended that you contact us to discuss the requirements of your business and we have therefore not included any information regarding this type of cover.
This guide outlines the key considerations when protecting the assets, revenue and liabilities of your business.
Under the Employers’ Liability (Compulsory Insurance) Act 1969, all employers have a legal requirement to insure against their liability for injury or disease to employees arising out of their employment. Cover is provided for all employees. The legal limit of indemnity is £5,000,000 however all policies have a standard limit of £10,000,000 to allow for legal costs and expenses associated with a claim.
Removal & Storage Contractors must provide the gross amount paid to all manual employees (as clerical is usually included at no additional charge) and Self Storage Operators must provide the same for all employees. These figures must be calculated before deductions and include all overtime, allowances, commissions, bonus payments, the employee’s own National Insurance and any private pension contributions. This must also include all payments to sub-contractors, except Bona Fide (see definition below). All employers’ pensions & National Insurance contributions should be excluded.
Bona Fide Subcontractors
Below is a list for guidance purposes only. If the answer is ‘yes’ to most or all of the questions, it is likely your sub-contractor can be classified as ‘Bona Fide’.
1. They bid for contracts.
2. They have the authority to employ others.
3. Paid by contract rather than on an ongoing hourly or daily rate.
4. They have their own insurance arrangements to protect themselves and your business.
5. They work under their own company’s immediate direction or supervision.
If you are in any doubt, please speak to our advisors.
Employers’ Liability Tracing Office (ELTO)
The insurance industry has established ELTO which requires specific information to be recorded for each Employers’ Liability policy. Your Employers’ Reference Number must always be provided to your insurers, via us, as it is a legal requirement that this information is provided to ELTO.
Excess of Loss
If you have a large number of employees at a single premises we would recommend purchasing additional Employers’ Liability Insurance cover in excess of the usual £10,000,000 Limit of Indemnity.
The Ogden discount rate multiplies the settlements reached for liability claims in the UK. As a result, many businesses are choosing to purchase additional limits to increase their total Employers’ Liability Limit of Indemnity.
Public/Products/Property Owners’ Liability
Public Liability covers your legal liabilities in respect of claims made by third parties for property damage or injuries suffered arising out of your business activities (excluding items in your custody and control, i.e. customers’ goods). For example, if you or your removal porters damage flooring or walls whilst moving goods in to the new house, your Public Liability cover will respond. Also, if your customers injure themselves at your self storage facility, and you are found to be negligent, this cover would respond.
Products Liability provides cover for injuries sustained by customers from products you may provide or sell, such as packing materials. The risk is low but claims do occur occasionally. This type of cover is often provided, as standard, by your Public Liability insurers.
Property Owners’ Liability
This cover is highly recommended if you or your business own(s) your trading premises.
Property Owner’s Liability insurance can cover any costs and damages awarded to a third party if they suffer a bodily injury following an accident, illness or disease whilst on or linked to your premises. It can also cover legal expenses including solicitor’s fees and court costs plus the claimant’s expenses.
Cover would also be provided where you are deemed to have a liability where, for example, a fire at your premises causes injury to a third party or spreads causing damage to adjacent property. This is particularly relevant for properties located in residential areas and it would be recommended that an increased limit is purchased in these circumstances.
Public/Products/Property Owner’s Liability Limits
The limit of indemnity for this cover can be set at £1,000,000, £2,000,000, £5,000,000, £10,000,000 or higher, although typically £2,000,000 is the minimum cover purchased. Given the Ogden discount rate, we would recommend a minimum limit of £5,000,000 is purchased.
If you own a building which has any properties with adjoining walls, or neighbouring properties which are close by, we would recommend a minimum Property Owner’s Liability limit of £10,000,000 is purchased.
You must declare the rebuild cost of your building to Insurers, not the market value. This includes the cost to completely reconstruct the building from scratch, including any surrounding walls, yard areas, gates and/or fences where you would like these to be included. The figure you declare should also take into consideration the price of labour and materials that would be involved in putting an identical building on to the existing land along with the cost of debris removal and fees associated with this.
It is normal for the rebuild value to be different to the market value, as factors including location and value of land are not taken into account. Having an accurate figure to provide to the Insurers will avoid over or underinsuring. The most accurate method of calculating the correct rebuild valuation is by obtaining a professional valuation from a surveyor and we would always recommend that you seek a formal valuation if you are not sure of the rebuild cost (you will most likely have had a survey completed at the time of purchase). This should usually take place every 3 – 5 years.
Your Sum Insured must also include:
• The cost to remove debris, including where specialist contractors are required (i.e. asbestos).
• Costs to comply with current legislation. This may lead to an upgrade to your premises and/or a change in design.
• A provision for professional fees (i.e. architects etc.).
Machinery & plant, fixtures & fittings and all other contents
The policies we provide offer ‘new for old’ cover as standard for contents including fixtures and fittings. ’New for old’ means the Insurer will pay for an item of the same condition as, but not better or more extensive than, its condition when new in the event that the item is lost or cannot be economically repaired. Therefore, when declaring a value for your contents, you should provide the replacement cost of the item in question as if it were new.
Your landlord will usually insure the rent payable on leased premises and you should check with them to ensure cover has been arranged. Where not already insured, you can arrange your own insurance. This cover protects rent that you will be required to pay even if your premises are unfit for occupation following loss or damage. The indemnity period for this cover should be adequate to protect the remaining period under your lease (typically 3-5 years for commercial property).
You do not need to include VAT in your Sum Insured figures if you are able to fully recover any VAT. If you are not able to recover VAT it is important that these amounts are included within your figures. The onus is on you to ensure your VAT calculations comply with current rules.
Business interruption insurance covers you for loss of income during periods where you are prevented from carrying out your normal business activities following an insured incident at your premises.
Incidents which can trigger this cover include damage to your premises or equipment by fire, storm or flood, for example.
What type of income can I cover?
In the event of a major fire at your storage premises your storage revenue would cease almost immediately. It would take some time for your premises to be redesigned, rebuilt and then refilled to the pre-incident storage capacity, meaning your business revenue would be significantly impacted for some time.
If you are a Removal & Storage Contractor, we would recommend you protect loss of storage (and associated transit) revenue under your Business Interruption policy on the assumption that your removals business would continue following a major loss at your storage premises. As a Self Storage Operator, you should purchase cover on a Loss of Gross Revenue basis as the core function of your business would cease to operate following a major loss.
Below are the different types of revenue that Business Interruption insurance can protect:
Loss of Gross Revenue – This type of cover includes loss of all income generated by your business.
Loss of Storage (and associated transit) Revenue – This covers you for the loss of income you would normally receive from customer storage charges.
Loss of Transit Revenue – This covers you for the loss of income you would normally receive from customer removal charges.
Loss of Gross Profit – The insurers will pay the sum by which your actual profit falls short of the expected profit following an event.
Increased Cost of Working – This cover is for the additional cost that would be incurred to resume normal business operations.
Loss of Rent Receivable – This provides cover for the rent that you receive from a tenant.
What is an Indemnity Period?
The Indemnity Period under a Business Interruption policy is the maximum period of time insurers will provide reimbursement under the policy. The intention is for insurers to provide cover up until the time your revenue has returned to the level enjoyed pre-incident, which could take many years.
When calculating your Indemnity Period, you should consider the time that may be required for the following to take place should your storage facility be totally destroyed:
• Site clearance;
• Designs for a replacement building;
• Planning permission;
• Contractor procurement;
• Construction of new facility (this can be particularly lengthy for older, non-traditional buildings);
• Internal fit out, including mezzanines and storage units;
• Filling your storage facility with new customers to pre-incident capacity.
It can take many years to return to normal following a major loss, so an indemnity period of 60 months would be prudent. The size of your storage premises and the rebuild complexity of the same are the main considerations when deciding which indemnity period would be adequate for you. You must also ensure you consider the time it would take to fill your facility with new customers. We would encourage you to speak with our advisers as this is an area which is commonly misunderstood.
Policies covering Buildings/Contents and Business Interruption typically exclude losses caused by an act of terrorism. This cover can usually be added subject to an additional charge. We would recommend you purchase this insurance protection to protect your assets, particularly if you are located in or around a city or built up area.
Cyber – Including Breach Response
Where you are handling customer information, and this is stored electronically, a data breach following a cyber attack could have a significant impact on your business. Many organisations focus on data breach protection, often including firewalls, etc., and fail to pay attention to what happens when a breach occurs.
We would recommend that all businesses who manage customer data electronically purchase adequate Cyber Insurance cover. This should include first and third party liability coverage for any loss or damage and an extensive breach response service which would support your business in the event of a cyber attack.
The insurance policies we offer are market leading and include extensive benefits. The cost is relatively inexpensive given the breadth of cover, with premiums starting from £150 including Insurance Premium Tax. We strongly recommend that you take out this cover.
Directors’ & Officers’ Insurance
This reimburses any Director or Officer for any loss as a result of legal charges brought against them personally for activities carried out in their professional capacity. Policies typically include a number of additional coverages, providing additional protection for civil fines and penalties, corporate manslaughter, crisis management, and employment practices liability. We would strongly recommend purchasing this protection where you are a limited company.
Other policies which should be considered:
• Commercial Legal Protection – Covers legal costs and expenses including employment disputes and more. This policy type also includes access to several helplines and document templates to support your business.
• Travel Insurance – Covers principals/directors for holiday & business travel and employees for business travel and also often covers the cost of sending replacement staff following injury or illness. This cover is particularly relevant if you operate in Europe.
• Personal Accident – Often combined with a Travel policy, principal and employees are covered for any accidental injury resulting in death, permanent or temporary disablement. The payments made by insurers can be used to compensate the injured person, or cover the cost for temporary replacement employees.
• Engineering Inspection – Inspection of plant and machinery as legally required. This may well be offered by the company who provides you with plant or lifts but the cost of cover is usually lower when purchased via an insurance broker.
• Fidelity Insurance (Theft by Employee or Employee dishonesty) – Covers against the risk of losing money due to fraud or dishonesty of an employee. Normally sums insured range between £5,000 and £25,000.
• Professional Indemnity – Covers the cost of compensating your customers for the loss or damage suffered resulting in your negligent advice. This type of cover is usually only required by Removal & Storage Contractors who are offering advice on relocation services in addition to their usual business activities, or where document management services (such as archive storage or shredding) are provided.
• Money – Reimburses you for any money lost or damaged at your premises, in transit or at an authorised person’s residence.
• Health – covers the cost of private medical treatment for illnesses or injuries that are defined as ‘acute’ (curable and short term). This can be a very useful way of avoiding a long wait for NHS treatment and help you or your employees return to work as quickly as possible.