Business Insurance Basics: Understanding the Essentials

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One common misconception among small business owners is that they don’t need insurance if they don’t charge for their services or if their business is small. Others assume, “It won’t happen to me.” However, if you offer a product or service—paid or free—you are potentially liable for claims against you. Insurance is essential protection, even if you consider your business low-risk.
Here, we’ll cover the basics of insurance, including how policies work, what terms to know, and the different types of policies available. Understanding these aspects will help you make informed decisions and ensure that you’re protected, whatever the future may hold.
What Is an Insurance Policy?
An insurance policy is a contract between you and an insurance company that exists to protect you if a claim is filed against you in connection with the services or products you provide. Most insurance policies last for 12 months, commonly referred to as the “policy term.”
Westminster Insurance Ltd. provides tailored policies for small businesses, with coverage options designed to meet your specific needs, whether you’re a freelancer or a small business with employees. Let’s look at some key terms you’ll encounter when setting up a policy.
Key Dates to know
To fully understand your policy and coverage, it’s essential to be familiar with the five main dates associated with insurance:
Policy Start Date
The date you select for your coverage to begin, which might differ from the date you purchase the policy.
Policy End Date
The date your coverage ends, generally one year from the policy start date.
Occurrence Date
The date the incident giving rise to a claim took place.
Claim Date
The date you become aware of a claim, which should also be when you inform your insurer.
Retroactive Date
The date after which the occurrence must take place for it to be covered. Westminster Insurance offers a “nil” retroactive date option, meaning you’re covered for incidents that occurred any time in the past, offering peace of mind.
What Affects the Cost of Your Policy?

Your policy premium—the cost of your insurance—is based on factors like:
Annual Income
Higher income levels can mean higher premiums, as they often reflect the value or extent of your services.
Number of Insured Individuals
If you have employees, adding them to your policy affects the cost.
Nature of Services
- The specific industry and tier of your practice influence premium rates.
Service Location
Coverage for services provided in the USA or Canada often requires additional premium due to differing regulatory and legal landscapes. However, Westminster Insurance includes worldwide coverage (excluding the USA and Canada) at no extra cost.
With these factors in mind, Westminster Insurance gives you the power to customise each policy to reflect your business’s unique profile, so you get the coverage you need without paying for extras that don’t apply to you.
Types of Policies: Claims-Made vs. Claims-Arising
Choosing the right type of policy is key to ensuring that claims are handled smoothly. The two main types of policies are Claims-Made and Claims-Arising. Here’s how they differ:
Claims-Made Policy
- This type of policy covers claims that you report during the policy term. The incident itself (the “Occurrence Date”) can have taken place in the past—even years prior—provided it occurred after the retroactive date, and you were not aware of any potential claims at the time you purchased the policy. Claims-Made policies offer flexibility, allowing you to stay covered for past events as long as the claim is reported within the policy period. This is ideal for businesses that may face delayed claims, even after an incident has occurred.
Claims-Arising Policy
- A Claims-Arising policy covers incidents that occur within the policy term. In this case, both the “Occurrence Date” and the “Claim Date” must fall within the policy term for the claim to be valid. While this policy type can be more straightforward, it may limit coverage if an incident arises after your policy has ended.
Selecting the right type of policy depends on the nature of your business. Westminster Insurance’s Claims-Made policies provide comprehensive protection, especially valuable in cases where claims may emerge months or years after the service was provided.
Choosing Your Cover Level
The cover level is the maximum amount your insurer will pay in the event of a valid claim. Choosing an appropriate cover level depends on various factors:
Client Interaction
- The more direct contact you have with the public, the greater the risk, which might require higher coverage.
Nature of Services
Different services carry different risks. For instance, high-risk services like beauty treatments or professional consulting may necessitate higher cover.
Client Types
Certain clients or sectors may have higher standards for insurance, especially if they deal with sensitive or high-value issues.
Business Size
Larger businesses often require more coverage due to the broader scope of their operations.
At Westminster Insurance, we work with you to assess your specific needs. Our team is ready to help you navigate your options, making sure you’re neither underinsured nor paying for unnecessary coverage.
Get Started with Westminster Insurance
Understanding the basics of business insurance is the first step toward protecting your business. At Westminster Insurance, we pride ourselves on helping small businesses and self-employed professionals find the coverage they need.
Our tailored packages, comprehensive Claims-Made policies, and knowledgeable team ensure you have the protection required to operate with peace of mind.
Ready to take the next step? Get a quick, personalized quote here or call us at 01305 839 939 to speak with a friendly agent. With the right insurance in place, you can focus on building your business, knowing you’re prepared for whatever the future holds.

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