Entrepreneurs’ and self-employed people’s need for (and requirements for) business insurance – a brief summary

Business insurance is rarely the first priority for entrepreneurs and the self-employed, but.

In connection with starting your own business or running an existing start-up, business insurance is often not the item that is at the top of the agenda. But it should have a significantly higher priority than it has today.

Getting insured is about security and about paying your way out of another party (an insurance company) taking over the risk that a certain damage event will cause a loss to your business – and there are plenty of risks when you are in the start-up or growth phase. Although the financial means may be limited, the desire to avert certain parts of the risk should be greater.

In addition to the above, business insurance is not always the type of document that is easiest to read for the general business owner. It therefore requires both time and desire to familiarize yourself with these areas, which very few entrepreneurs and self-employed people have. So don’t worry, you’re not alone in this attitude.

Below we have briefly summarized a number of the business insurances that may be relevant for you and your company. However, the specific needs depend entirely on the type of business you run or want to run.

Statutory workers’ compensation insurance

All limited liability companies, including entrepreneurial companies (IVSs), private limited companies (ApS), public limited companies (A/S) and cooperatives, are obliged to take out occupational injury insurance for the company’s employees against occupational accidents or work-related illnesses.

Failure to take out industrial injury insurance may result in the employer being fined DKK 5,000 in the event of a first-time occurrence. If the lack of workers’ compensation insurance is still not taken out, it may result in a fine of DKK 10,000.

In addition to the risk of fines to the employer, the employer is also obliged to pay compensation to the injured employee.

Self-employed persons without employees (e.g. sole proprietorships without employees or partnerships (I/S) without employees) are not directly obliged to take out workers’ compensation insurance.

All in all, workers’ compensation insurance is an important and indispensable type of insurance that you as an entrepreneur or self-employed person should take out if you run an IVS, ApS, A/S or cooperative.

Commercial and product liability insurance

Basically, this type of business insurance contains two elements; an insurance against the company’s commercial liability and a product liability.

Commercial liability includes the liability that you or your employees may risk inflicting on the company in the operation of the company’s business. A concrete – and smaller – example of this is if you are a plumber and visit Mrs. Jensen in her house. On the way through the door to Mrs. Jensen, your toolbox hits a vase that breaks. In this scenario, Fru Jensen will be able to make a claim for damages against your company, which will be relevant to the commercial indemnity insurance.

Product liability includes the liability that your company’s product (or service for business) causes in the event of damage to others than the product/service itself. A concrete – and again smaller – example of this is if you produce shelving for private individuals. If it turns out that the shelves you have produced suffer from a defect that causes the shelves to collapse and destroy a lamp, it is a matter of product liability.

It should be noted that the above examples are very modest in nature and size, and that they may be major damage scenarios that can have decisive consequences for you and your company’s continued operations.

Therefore, it is also a type of business insurance that is worth considering for most entrepreneurs and self-employed people.

Crime insurance

We live in a time where both internal and external business-related crime is highly topical. Corporate crime is about your company suffering a financial loss as a result of, for example, embezzlement, unauthorized/false use of identity and bank account information (so-called “Social Engineering Fraud”).

An example of this could be that you are responsible for the finances of the company. You’ll receive an email from an email address that looks exactly like your partner’s—just a letter has changed. The e-mail contains instructions for you to make a quick payment to a supplier who has just sent a reminder for payment. Payment is initiated, and it turns out that payment has been made to a completely different account, which was not intended (even though it was the bank information that appeared in the email). The money is lost – and your company is left with a financial loss.

Unfortunately, the example above is not an unthinkable scenario, and it is therefore important to consider whether a crime insurance policy should be taken out. This is a risk that is often worth feeling (especially for entrepreneurs and self-employed people with fewer means). Therefore, this is also a business insurance that should be considered.

Cyber insurance

The world of technology has meant that the risk of cyber attacks is high. Bigger than it has ever been before.

Several companies, both large and small, have been hacked over the past year, and this has caused enormous inconvenience – and crucial financial losses.

For the same reason, it is also a good idea to get insured against cyber attacks, so that you are protected in the event of, for example, ransomware attacks and the like.

An example of cyber risk could be that your company’s systems are locked by a third party/hacker who has gained access to your systems. The consequences of this can be incalculable, which is why cyber insurance is a good idea. This may include a crisis management component that allows you to obtain insurance coverage for so-called “first reponse” services, e.g. IT assistance, legal assistance, etc.

You can read more about cybersecurity and risks for businesses on sikkerdigital.dk.

Managers’ liability insurance

If you are registered on the board of directors or the executive board of an active company, you are exposed to management liability in connection with the operation. For example, it may be that you have a private limited company (ApS) that you both own and are a director of. It is important to mention that regardless of whether you are the (sole) owner of capital or not, you are still subject to management responsibility.

The managerial liability under Danish law is a personal liability, which means that you, as a member of the Executive Board or the Board of Directors, are liable for everything you own and are personally liable for the acts or omissions that you or others in the management have caused.

Therefore, it may be a good idea to take out managerial liability insurance to ensure that you are insured if the management or board of directors is faced with a claim during or after the operation of the company.

Professional liability insurance

Do you work – for example – in the liberal professions, or are you an expert in a field, and do you provide services based on this expertise? In that case, professional liability insurance is a type of business insurance that you should consider. This type of business insurance relates to the liability that you and your company may potentially incur as a result of negligent acts or omissions in the exercise of your business.

For example, it may be relevant if you are an engineer and have provided technical advice to a customer, but you mistakenly overlook a detail in the customer’s relationship, which results in a financial loss for the customer.

In today’s Denmark, there are a large number of new services and services in which such insurance may be relevant. It is therefore worth considering contacting your business insurance company whether you should take out such insurance.

Other business insurances may also be relevant to you

Some will also benefit from taking out movable property or building insurance that covers damage events such as theft and fire that cause damage to the company’s own physical belongings. However, the scope and need for this may be limited in the early stages, but it depends entirely on the type and size of the company.

Raadgiver.dk recommend that you contact your insurance company or your insurance broker for further clarification of your specific needs for business insurance.