It’s a fair question. When you’re watching costs, insurance can feel like something you’ll deal with later. But the right cover isn’t about ticking a box. It’s about protecting what you’re building.

This guide helps you decide whether your business needs insurance, what’s legally required and how to think about risk in a practical way.

When business insurance is legally required

In some cases, insurance isn’t optional.

If you employ staff, you’ll usually need employer’s liability insurance by law. There are minimum cover requirements, and you can be fined if you don’t have it in place.

Beyond that, most types of business insurance aren’t legally compulsory. But that doesn’t mean they’re unnecessary.

When insurance is required by contract

Even if the law doesn’t demand certain cover, clients might.

Many contracts require proof of public liability or professional indemnity insurance before you can start work. This is common in sectors such as construction, consultancy and events.

If you want to win larger contracts, insurance can become part of your credibility.

When insurance simply makes sense

Some businesses operate with very little risk. Others face exposure every day.

You’re more likely to need insurance if you:

• Work with the public
• Visit client premises
• Handle valuable equipment
• Provide advice or specialist services
• Employ staff

Even online businesses can face risks linked to data, contracts or client disputes.

What could happen without cover

If something goes wrong and you don’t have insurance, the financial impact falls on you.

That might mean:

• Paying legal fees to defend a claim
• Covering compensation if you’re found liable
• Replacing damaged or stolen equipment
• Absorbing lost income after disruption

For small businesses, even one significant claim can be hard to recover from.

How to think about the level of risk

A useful way to approach the question is to ask what would happen if the worst occurred.

If a client claimed financial loss, could you afford legal costs? If someone was injured at your premises, could you handle the compensation claim? If your equipment was stolen, could you replace it quickly?

Insurance is there to absorb risks that would otherwise threaten the stability of your business.

Balancing cost and protection

Insurance should feel proportionate. Over insuring wastes money, but under insuring can leave gaps.

Start with legal requirements and contractual obligations. Then look at your biggest risks and work from there. A broker or adviser can help you identify sensible levels of cover.

You may not need every policy available, but most trading businesses need at least some form of protection.

Whether you need business insurance depends on what you do and how you operate. In many cases, it’s less about obligation and more about safeguarding your future.