Most small business owners buy insurance only when someone forces them to, such as a landlord, a lender or a vehicle registration. Then a fire, a theft or an accident happens and they discover how much they depended on stock, equipment and premises they never protected. Insurance is a cost that you hope never to use, which makes it easy to skip. A short review of your risks and the main types of cover helps you protect what matters without overspending.

Start with the risks

List what could go wrong and how badly it would hurt. Fire, flood, theft and damage to premises and stock. Injury to a customer or an employee. Loss of income if you cannot trade. Damage to your vehicles. Loss of money in transit. Illness of a key person. Rank them by likelihood and by impact. Insurance is best for risks that are unlikely but would be costly, not for small, frequent losses you can absorb.

Property and stock cover

This covers buildings you own or lease, equipment, furniture, fittings and stock against named events such as fire, theft and damage. Insure for replacement value, not what you paid, and update the sums insured when you add equipment or stock. Under-insurance reduces claims proportionally. Keep an up-to-date list of assets; the fixed asset register with depreciation and the weighted average stock ledger provide the values.

Public liability

If a customer slips in your shop or your work damages a client's property, you can be sued. Public liability insurance pays legal costs and compensation up to a limit. It is especially important for businesses with visitors on site, contractors and caterers. Check the limit of indemnity and the excess.

Employer's liability and staff cover

Employers have duties to their workers, including compensation for injury at work under the law. Work injury benefit cover protects you from the cost. Medical and life cover for staff are not always required, but they help retain people; the staff medical claims and cover tracker shows how to manage a scheme, and hiring your first employee lists the basics.

Motor and goods in transit

Vehicles need at least the minimum legal cover. A comprehensive policy covers damage to your own vehicle as well. If you move goods, goods-in-transit cover protects them on the road. Importers should read marine cargo insurance for importers explained.

Business interruption

If a fire closes your shop for three months, your rent and wages continue while your income stops. Business interruption cover replaces lost profit and continuing costs after an insured event. It is often overlooked and can be the difference between recovering and closing. Estimate your monthly costs with the 12-month cash flow forecast to decide how much cover you need.

Cash and fidelity

Cash-in-transit and cash-in-safe cover protect money on hand. Fidelity guarantee cover protects against employee dishonesty. These add to the controls in how to protect your business from fraud and theft, but do not replace them.

Choose the insurer and compare

Get at least three quotes for the same cover. Compare the sums insured, excess, exclusions and claims process, not only the premium. Ask other business owners about the insurer's record in paying claims. A broker can help you compare and may advise at no extra cost to you, but ask how they are paid.

Read the exclusions

Policies exclude things, and the exclusions matter. Common ones include wear and tear, unoccupied premises beyond a period, poor maintenance, unlicensed activity and failure to take reasonable precautions. Meet the conditions, such as installing alarms or fire equipment, or the claim may fail.

Tax treatment

Premiums for business insurance are generally deductible expenses if you keep the invoice; see expenses small businesses can deduct. Personal life policies are treated differently, and relief may apply; see how to claim insurance relief on PAYE. Include premiums in your budget.

Make claims properly

Report losses promptly, take photographs, keep damaged items, get repair quotes and keep all documents. Never exaggerate a claim. Keep policy documents and renewal dates in your records, and review the cover every year as the business changes. Insurance will not stop bad things happening, but it can stop them ending the business.