Understanding franchise business insurance
To protect your new home care franchise, it’s important that the different aspects of your business are covered by insurance. This will help to ensure that if unexpected events occur – from damage to your property or cyber attacks through to claims from clients or your employees – that your franchise can recover rapidly from such setbacks.
So, what is franchise business insurance, what different types of insurance are there and how can you choose those that are best for you?
What is finance business insurance?
The whole purpose of franchise business insurance is to protect you from different risks and liabilities and to minimise the resulting financial and reputational impact. To safeguard your business, you need to know what aspects could pose risks and how to ensure yourself against significant financial loss. This will usually involve a complete franchise insurance plan, which covers all the relevant elements; but could also involve separate insurance policies. Some franchisors require a mandatory insurance plan as part of the franchise agreement. This is because the insurance ultimately protects the franchisor as well as the franchisee. The cost of the insurance depends partly on the brand value of the franchise and the potentialprofitability of the business.
Types of franchise business insurance
So, what are the main types of insurance policies that franchisees will need, and what type of protection do they provide?
Public liability insurance
This is one of the most important types of insurance for a franchise and is also sometimes called general or business liability insurance. It’s designed to protect you and your business against legal claims involving damage to property or bodily injury caused by your business activities. It will help to cover financial costs such as medical or legal fees and claims for damages.
Professional indemnity insurance
Also called professional liability insurance, this will cover legal costs and damages if one of your clients claims that your services (including errors, negligence or professional misconduct) results in harm, reputational damage or financial loss.
Employer’s liability insurance
This is a legal requirement for franchisees. Also known as workers’ compensation insurance, it will protect you against claims from your employees if they are injured or become ill as a result of working for you. It covers items such as medical and legal costs, disability payments, death benefits and remuneration for lost wages.
Business interruption insurance
Business interruption insurance will compensate you for lost income if your franchise’s activities are disrupted due to unforeseen circumstances beyond your control. It will cover you for elements such as wages, overheads and loss of earnings if your business is forced to close as a result of the disruption.
Property insurance
If your business premises, equipment, vehicles and other assets are lost or damaged due to theft, vandalism, fire or natural disasters, property insurance will help to protect you from the resulting financial losses.
Cyber liability insurance
Cyber attacks have become a growing threat for businesses of all types and sizes. This insurance will protect you against the financial loss and reputational damage caused by such attacks, hacking and any data breaches. It will also help to cover the cost of legal fees and fines if data breaches occur.
Why is insurance so important?
Insurance is a legal requirement for franchisees, to protect both themselves and the franchisor. Without insurance, your franchise would become very vulnerable to major financial loss, reputational damage and even closure of your operations. This in turn could have a significant impact on the corporate image of your franchisor.
A failure to insure your franchise properly could also result in severe penalties, fines or even the termination of your business due to non-compliance with regulations and your franchise agreement. In contrast, business insurance will give you peace of mind that you’re protected against unforeseen events, costly lawsuits and disruption to your operations.
How to choose and manage your insurance policies
The type and level of insurance you choose will depend on a range of factors, including the reputation of the insurer, the cover provided and the cost. One of the starting points for your decision will be your franchise agreement, which may stipulate the need for certain types of insurance. Your location could also affect your policy, as some areas have a higher crime rate or could be more likely to suffer from natural disasters such as floods.
Before you choose any policy or plan, make sure you fully understand all of the terms of the policy and any exclusions or limitations, as these will affect the degree of protection it provides. This is one of the reasons why it’s so important to get professional advice from a specialist franchise insurance broker.
Once you’ve chosen your insurance policies, review them annually to ensure they are kept up to date and will continue to provide the coverage you need as your business grows. If you need to claim on the insurance, contact the insurer as soon as possible after the event, and work closely with them so that any issues are rapidly resolved. They will then provide the relevant remuneration.
Avoiding common insurance pitfalls
It can be easy to fall into the trap of not spending enough time thinking about your insurance policies. For instance, one common mistake is to fail to get adequate insurance cover. You need to be sure that if an unexpected event occurs, you don’t miss out on full compensation because you were underinsured.
Equally, make sure you have coverage for all the likely eventualities. In the chaos of setting up a new business, it can be easy to overlook a specific area of cover that you need. As a starting point, check through the list of policies above and ensure you have all the cover you need. It can be easy to forget aspects such as cyber liability insurance – but cyber attacks are sadly a growing threat.
Finally, check that the franchise agreement specifies the limits of your liability – otherwise you might find yourself responsible for your franchisor’s actions.
The role of professional advice
With business insurance, it’s wise to seek professional guidance from a specialist franchise insurance broker and even a legal advisor. They will help you to understand the nuances of different insurance policies. The insurance broker will help you to assess the risks for which you should be insured, and the likelihood of these arising, as this will affect your choice of the best policies for you. Similarly, a legal advisor will ensure that your insurance policies enable you to comply with all the relevant home care and franchising regulations.
Franchisors can also help to reduce premiums. For instance,Home Instead’s support and advice can make the process of getting insured much easier and can also help to keep your premiums lower.
Changes coming in business insurance
The insurance market is embracing digital transformation (which will bring its own risks, such as increasing cyber security). We are therefore beginning to see the introduction of digital insurance platforms and usage-based insurance. As in many other areas, artificial intelligence (AI), advanced analytics and machine learning will have a significant effect on how insurance policies develop in the future, including the streamlining of claims processing and other operations. Risk assessments will become more accurate, and policies more personalised. Factors that will affect the future cost of policies include the prevailing economic conditions and climate change.
Get insured!
Business insurance is an integral part of a franchisee’s life. It’s therefore vital that youunderstand the regulations and risks that apply to your everyday operations – and that you have adequate insurance cover to meet all of these. You’ll then have the peace of mind that your business is well protected, leaving you to focus on establishing and growing a successful franchise.
Is franchising for you?
With the right guidance, managing insurance doesn’t have to be arduous. Insurance is just one area that Home Instead supports franchisees with. Book a call with Franchise Development Manager Luke Spellman and see what else Home Instead guides franchisees through.