As many as 64 per cent of the UK’s small business owners and sole traders operate without professional indemnity insurance, according to the findings of a new study from small business insurer constructaquote.com.
Building contractors, engineers and estate agents were found to be the least likely to have taken out professional indemnity insurance policies which are designed to protect businesses that offer professional advice that could result in a customer losing money.
In signs that a lack of available information and understanding about the benefits of the insurance could be holding many owners of small firms back from buying it, 39 per cent of respondents to a survey conducted amongst 2,165 UK small business owners and sole traders answered that they didn’t feel they’d ever need it when asked why they didn’t have coverage. Almost two out of five respondents said that they didn’t fully understand what a professional indemnity policy would cover their business for.
Financial considerations were an issue for 12 per cent of respondents, who claimed that limited budgets prevented them from taking out professional indemnity cover.
The survey revealed the construction sector to be the worst culprit, with the largest proportion of respondents found not to have cover hailing from the sector. Engineering, property, IT and the health and fitness sector also ranked highly amongst those areas of work where professional indemnity coverage was uncommon.
Commenting on the findings, constructaquote.com CEO Lyndon Wood said that for small businesses, it’s far better to have indemnity insurance and never need it, than the other way around. “Those who say they don’t own it because they can’t afford it should really do a little research – it’s affordable, and business owners can pay in either monthly or annual instalments.
“We’re shocked to hear just how many small business owners in the UK don’t have this insurance; it’s absurd,” Wood continued. “Those who say they haven’t invested because they’ll never require it are those who are most likely to one day be in a position to use it.”
Despite these figures, the survey’s findings suggested that small business owners are beginning to understand the importance of professional indemnity insurance. Of the 36 per cent of respondents who had bought coverage, more than two fifths stated that they’d bought it as a precaution, whilst 35 per cent reported that they’d known other owners who’d been sued without the insurance and subsequently lost their business.
Flooding has also become a major insurance-related issue for small businesses in recent months, with local authorities encouraged to develop more comprehensive and affordable flood insurance schemes.
In another recent study, the Federation of Small Businesses (FSB), found that as many as 75,000 of Britain’s smaller firms at risk of flooding have so far found it difficult securing flood insurance.
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