Whichever franchise you’re joining, having the right insurance in place is essential. Unforeseen events can quickly derail a franchise unit and have catastrophic effects not only on the business, but on its owner and staff too. Our guide to franchise insurance will help you avoid issues further down the line.
When you become a franchisee, there’s a lot to think about, from employing staff to setting up a website and making sure you’re operating in line with the franchisor’s instructions. But make sure you don’t overlook franchise insurance.
If you forget to sort out your policies, not only are you likely to be breaking the law, but you’ll also be putting the future of your business in danger. So, what insurance do franchisees need?
Insurance you need if you employ staff
Employers’ liability insurance
This policy is compulsory for anyone who hires staff as part of their business. It’ll cover you if a current or former employee files a claim against you after suffering an injury or illness at work.
You should be covered for at least £5 million and display the certificate in your workplace - otherwise, you can be fined £1,000.
Employment practices liability insurance
Although this type of insurance isn’t required by law, it’s a good idea to consider it. This policy will protect you if any of your employees file a lawsuit on the grounds of sex, age, race or disability discrimination in your workplace. It also covers claims relating to harassment, wrongful contract terminations and other employment issues.
It’s important you have this insurance in place as soon as you launch your business, as you may need it during the interview and selection process. For example, you could be accused of discrimination for hiring a certain candidate.
Insurance you need if you use vehicles
If you use a car, van or other type of motorised vehicle for your business operations, you are legally obliged to take out motor insurance. You’ll need to make sure it’s in place for every vehicle and driver. It’ll cover liability for bodily injury or damage to vehicles and property.
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Insurance you need if you offer knowledge, skills or advice
Professional indemnity insurance
While some official bodies make it compulsory for businesses in their sector to take out professional indemnity insurance, other companies invest in the policy by choice. You must have this type of insurance if you’re a solicitor, accountant or financial advisor, architect or chartered surveyor.
Taking out this form of insurance will protect you when customers take action after experiencing a professional or financial loss at your business. It also covers fees relating to:
- Defamation or libel
- Lost data or documents
- Unintentionally shared confidential information
- Copyright infringements
Insurance you need if you work with the public
Public liability insurance
Public liability insurance is one of the most important and common types of insurance taken out when opening a franchise. If your business involves any kind of interaction with the public, this kind of liability insurance is essential, as it covers you for third-party damage or customers’ injuries. Although it’s not legally required, it could stop you losing lots of money when you’re asked to pay out huge fees.
Insurance you need if you sell products
Product liability insurance
If your franchise supplies products to the public, it’s your responsibility to make sure the items you’re distributing are completely safe. If they’re not, you may come up against legal action and some hefty fines.
Even if you take every precaution to make sure your products meet all the necessary safety standards, it’s a good idea to have product liability insurance in place.
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Insurance you need if you visit someone else’s property
Property damage liability insurance
When you take out this type of insurance, you’ll be protected should you accidentally damage someone else’s property. If you regularly visit other businesses or clients’ homes as part of your work, you may want to consider investing in this kind of cover.
Other types of franchise insurance
Business interruption insurance
If fire, flooding, theft or other disasters force you to close your doors temporarily, business interruption insurance will cover your bills so you can get back up and running quickly.
If your business processes and stores information on a computer, you should invest in cyber insurance to protect yourself if any of your data is damaged or lost.
Do you need insurance if you work from home?
Although you don’t necessarily need to take out a separate home insurance policy, your existing one may not provide the right level of protection for your home-based business.
For example, if you store stock, you should make sure your current policy covers theft and damage. If customers visit your home, you’ll need public liability insurance, and if you provide advice or manage customer data, you should consider professional indemnity insurance.
Plus, if you have employees working at your house, you should also take out employers’ liability insurance.
How do you determine what kind of insurance your franchise requires?
This guide should give you the information you need when it comes to sorting your business insurance, but you can find lots more advice online.
Also, your franchisor should provide a run-down of the insurance policies you must take out, either in the franchise agreement or the operations manual. And if you need any more advice, your franchisor will probably be happy to guide you through the process of setting up insurance cover.
It’s also worth speaking to your franchisor to see whether they’ve established a centrally managed insurance system. If they have, you won’t have to spend so much time organising your business insurance policies. Plus, you should be properly protected from day one.
You can find additional guides right here at Point Franchise; we publish new articles daily to help franchisees and franchisors alike build successful businesses.
Alice Tuffery, Point Franchise ©