SMEs in looming underinsurance crisis

There are new warnings that over a million self-employed workers do not have adequate insurance cover leaving them at risk of losing their homes if they face a claim.

The research by self-employed insurance specialist Suited Insure found there are more than 4 million self-employed or freelance workers in the UK but that a third of small and micro-business owners were not adequately insured, leaving them vulnerable against claims.

The survey also found 24% of self-employed people had no insurance whatsoever with 7% stating they didn’t even know they could be insured.

A further 8% said they had some cover but no professional indemnity or public liability policy – the crucial insurances they need to protect them against being sued.

Jana Kejvalova, of Suited Insure said: “There are millions of small business owners in the UK and the sector is the lifeblood of the economy.

“But our survey found around a quarter of them – about a million people – have no insurance cover whatsoever with many not even realising they could insure their business.

“This could be disastrous for them if something goes wrong and they end up being sued. For example if someone suffered an injury on their premises or if they made a mistake which cost someone money.

“People like bookkeepers and accountants need to be insured in case they made an error which caused a client to under or overpay their tax bill. Hairdressers need to be insured in case they accidentally snip a customer’s ear, and personal trainers must be insured in case their advice led to a client suffering an injury.

The survey said the lack of understanding of the need for adequate insurance threatens to become a huge problem particularly for those operating as sole traders as they could end up losing everything they have, including their homes if sued by a disgruntled customer.

“The risk for sole traders is greater than those operating as limited companies but many small business owners fail to appreciate the dangers,” it added.

Suited Insure say thousands of people have started small businesses over the past two years with the pandemic encouraging many to ditch their day job and go full time with side hustles.

They include hairdressers, personal trainers, bookkeepers, and business consultants, but huge numbers have failed to understand the need to insure themselves against possible legal action.

“SMEs could face litigation if their work leads to injury to a customer or financial loss. They could also be sued by employees if they suffer an injury while working,” the company continued.

Kejvalova continued: “Britain’s small business owners really are heroes to the UK economy but sadly they face huge amounts of stress and pressure.

“We want to make their lives a little bit easier by giving them one less thing to worry about. By making sure they are adequately insured they can operate without fear or concern.

“It is especially true of sole traders but also of small, limited companies. No matter how large or small a business is, it needs to be protected against risk.”