A recent study into small business' attitude towards insurance found a number of needs for insurance companies to meet. Many insurance companies are after SME business so how well are they doing?

Small firms are well aware of the risks their business faces. They are already used to risk by the very act of setting up in business themselves. SMEs are calculating when assessing risk and they prefer to pick and choose the risks they want to cover.

Some insurance companies meet this need by offering a flexible package allowing policyholders to add and remove covers as required. These packages are usually structured where one type of cover is compulsory, like public liability insurance, and then other types of cover can be added as required, like employers' liability or business equipment.

The research also found small companies are short on time as they must concentrate on running their business. They are often unaware of the detail of their insurance policies. As such, they value clear information and help when deciding what insurances to carry.

This is where traditionally insurance brokers have excelled. However, as more SMEs start to look online and deal with their policies out of office hours, brokers and insurance companies need to reconsider how they deal with SMEs.

Many insurance companies and brokers will offer policies online now, but are they providing all the help a small business needs in a clear and unambiguous way?

Business insurance sites are often full of jargon and it can be unclear as to how the different policies fit together. Many sites rely on SMEs being experts in insurance and do not provide the level of help required. That said, the policy wordings themselves have become clearer over time with some insurers offering plain English wordings. Policy summaries are also widely available which give an abbreviated version of the cover.

Finally, there is a feeling of mistrust surrounding insurance with small firms concerned that claims are routinely disputed. Many insurance companies in the sector are not household names and there are the cheap and cheerful providers as well as the brands who promote quality. Unfortunately this differential is not always obvious and the small business may not find out until it's too late.

For more information see www.hiscox.co.uk

In any business venture there is risk and the purchase of adequate insurance that helps manage the risk is particularly important in the formative years of any company.

Unlike the more common purchase of motor insurance, where most people understand the word ‘comprehensive' or the limitations of third party, the complexities of small package insurance and their implications can be vast.

The actual premium cost of insurance is negligible. If proper advice is not sought on commencement of an insurance contract, the cost of getting it wrong can be huge.

When considering insurance cover you should look at the disruptive effect on your business caused by a specific event which, for example, could be a fire at your own premises, a fire at a major supplier or even a key customer on which you rely for a high proportion of your business.

The requirements by contract to carry certain levels of insurance vary and you need to have a cover or an advisor who can reflect different trading conditions. Clearly when working for public authorities and airports, there is a requirement to have much higher levels of indemnity (sum insured) as against what would normally be required in other circumstances.

There also may be a reliance on certain machinery or third-party services: internet, telephones, post, computer equipment, switch gear, production machines, all of which may have a specific role within your business and their failure through not being supplied, or because they break down and stop you providing a service to your own customers with loss of revenue.

When looking at your risk you need to stand back a little and ask what the worst thing that could happen is and how it would affect your business and its ability to provide my product or services to my clients or customers. The answer might be a permanent injury or disablement to yourself or another key worker or it simply could be that you are sited close to a petro-chemical plant, which, if it suffered a major disaster, would result in your being excluded from your own premises.

All of these things can be catered for in one form or another, and it is important that you seek out the correct advice.

There are many brokers that specialise in different aspects of commercial life, as well as those like my own company, Jardine Lloyd Thompson, which handle both specialist and general ‘all trades' type covers. The internet is a good start for research and also takes the recommendations of other people who have experienced the service of certain brokers. Trade bodies often give stamps of approval to brokers, so advice is also available that way.

There is no substitute for taking a little time to do some research, seek advice or get a recommendation. I would also strongly recommend that the best way of identifying risk is to carry out your own disaster recover plan. This will highlight areas of risk that you should look to see if an insurance policy could cater for, and may also highlight things that you could do as an alternative to taking out an insurance contract.

For more information visit www.jltgroup.com

Starting a new business takes a tremendous amount of organisation and effort, so deciphering complex, jargon-littered commercial insurance policies is usually way down any new business owner's list of priorities. Arranging your first commercial insurance, however, need not be such a daunting task; in fact you can learn a great deal about the risks facing your business just by talking to your insurer.

Not only will you gain a good idea of the kind of costs you'll need to include in your business plan, but you'll also find out ways to reduce your premiums. Being familiar with business risks and insurance is also an important part of business planning, and demonstrates good foresight to lenders or investors should you need to borrow money to kickstart you business.

Good insurers can provide valuable information on risks and how to reduce costs, for example:

• Finding a commercial property with an adequate security system already in place

• Thinking about the physical security standard of locks, windows and roofs

• Producing written health and Safety policies

• Appointing designated first-aiders

• Implementing computer data backup procedures

Your insurer can talk you through the information required for a competitive quote and the covers you require but it pays to be prepared. Before putting in that important call make sure you know your annual turnover, how much you will pay in wages each year, what types of locks and systems safeguard your premises, and, if you're a contractor, what type of premise you will be working on.

The lowest price and the right price are two very different things and, as a business owner, the type of insurance you opt for could have a direct effect on your livelihood, so don't be afraid to ask questions before you accept a quote. Of course, every business faces different issues, but here are a few questions to get you started:

• How long will the price remain valid? The price may change when the time comes to buy

• What payment options are available? There are 0% interest options out there

• What extras are offered with the policy, such as advisory and support networks?

• Will my legal costs be covered in the event of a dispute with a supplier or employee?

• Will my revenue be subsidised if I can't trade, for example, if the premises was flooded?

• What value of stock or money is covered in transit?

• Can I increase my cover as my business grows?

• Will the insurer continue to provide cover if I branch out into other areas?

• Will my premiums go down as my experience grows?

Shop around, and use the internet before you buy. There is a wealth of price comparison sites available, similar to those for motor insurance, and be sure to exploit helpful small business start-up guides published on many insurers' websites.

But don't be afraid to pick up the phone if you have unanswered questions. Most importantly, make sure you're happy with the cover provided, and that you're confident you're with a company you can trust so that you can concentrate on running your new business with peace of mind.