It’s important to protect your business from the things you can’t control … that’s what insurance is all about! But what insurance do you need for a clothing business? If you’re designing, making or selling garments yourself, what insurance do you need by law, and what’s worth getting if you can afford it?
In this guide we’ll introduce 9 different types of insurance cover for clothing businesses. Some types of cover are absolutely essential, while others are only worth getting if your business works a certain way (if you sell online or go to a lot of fashion shows, for instance).
Clothing business insurance: 9 types of cover
When you pick up the phone to an insurance broker, they will typically sell you a package of insurance products, grouped into one or more insurance premiums. When talking to your broker, make sure that your premium includes every kind of cover that might be relevant to your business.
1: Public Liability Insurance
Also known as ‘General Liability Insurance’ outside of the UK, public liability insurance protects your business against any legal claims that might arise as a result of negligence or error.
Public liability insurance is one of the most common types of insurance held by businesses in the UK. It’s a sort of financial safety blanket that’s paid for by businesses, but is really meant to protect members of the public from harm. For instance, if you walked into a clothes shop, slipped on a wet floor and broke your arm, the shop’s public liability insurance would pay out on any costs awarded in court. Technically, the insurance is protecting the business that holds the insurance policy, but it benefits and protects the general public as well.
Public liability insurance is important for any business that has any involvement with, or exposure to, the general public. If you want to run a market stall or trade from a popup shop, for instance, you will have to have public liability insurance. Event organisers simply won’t let you trade without it. If you operate a business vehicle or if people visit your studio, it’s worth getting public liability insurance, too.
2: Employers Liability Insurance
Employers liability insurance is a legal requirement for almost every business that employs people in the UK. It protects your business against the cost of legal judgements relating to employee health & safety.
If a member of your team is injured or becomes ill as a result of the work they’re doing for you, then they can take you to court and sue for compensation, medical expenses or lost income. If this happens, then employers liability insurance will cover any fines or compensation that you’re ordered to pay.
You might think that this one is only relevant if your business employs people … just remember that you might be considered an employee of your own business, depending on how you have set it up. If your business grows, then you will eventually have to start employing people, so it’s worth at least investigating this one.
3: Equipment Insurance
Whether your business relies on sewing machines, laptops, heat presses or other expensive items, it’s important to get them covered so that if something breaks down or gets stolen, you can make a claim and get your business back up and running as soon as possible.
Equipment insurance comes with varying levels of cover. Some policies will cover repair work in the event of a machine breaking down or getting accidentally damaged, but they won’t cover the whole cost of a brand new machine if you are burgled. If possible, try to get a ‘new for old’ policy, so that you can buy brand new commercial-grade kit if anything is stolen or damaged beyond repair.
Make sure that your insurance broker has a complete understanding of how your business operates and what it would cost you to get back up and running in the event of a food, fire or theft. Equipment insurance is only worth holding if it’s appropriate to your needs.
4: Theft of Takings Insurance
If you have to hold cash overnight, either in a vehicle or in a safe in your home, then you should seriously consider theft of takings insurance. Theft of takings cover protects you from cash being stolen in the time it takes to go from your shopper’s hands to your bank’s front desk.
If you get robbed or burgled and you lose a weekend’s takings, then theft of takings insurance will pay you back whatever you have lost. You have to meet certain conditions for this insurance to be valid. For instance, your insurance company will probably want you to keep cash in a discreet safe overnight, you will probably need a burglar alarm and you’ll need to keep meticulous records of everything you have sold on the affected days.
If you buy a general ‘retailer’s’ insurance policy, then theft of takings insurance may already be included. Just make sure that the limits are high enough to cover at least one weekend’s worth of sales, and make sure that you’re meeting all of the security requirements. Talk to your insurance broker if you have any doubts.
5: Personal Accident Insurance
The clothing industry involves a lot of pointy things and hot things, but that’s not the only reason to get personal accident insurance! Personal accident insurance protects against accidents both in and out of work … and that’s a lifesaver if you’re self-employed. If you’re injured and you can’t work for a few weeks, a personal accident insurance policy can protect your income and help you meet your medical expenses, too.
Personal accident insurance isn’t just for the boss. You can get it to cover your staff, too. In the event of an accident, personal accident insurance will cover income and medical expenses, and — without getting too morbid about things — it will also pay out if someone dies.
You might already have personal accident cover as part of your life insurance policy, and there may be tax implications if you want to arrange it for your employees. Always talk to an insurance broker before you sign on the dotted line. Have a chat with your accountant, too, just to make sure you’re doing things in the most tax-efficient way.
6: Cyber Cover
Cyber cover is important for any business that relies on cloud-based or password-protected systems to run their business. Nowadays, that’s almost everyone!
If you sell clothes directly to consumers through your own website, then you’re dealing with customers’ names, addresses and payment information. It’s up to you to keep this data protected and secure. If you get hacked, cyber cover can pay out the costs of any fines or compensation that your business has to pay. Certain types of cyber cover will take care of systems recovery costs, too (like paying an IT expert to come and get your systems back online).
Cyber cover is also helpful if you do a lot of business-to-business trade. For instance, if you sell a large order of clothes to a retailer, you might email them your invoice. If you get hacked without realising it, and the bank account details on that invoice get changed, then the retailer can pay a huge amount of money to the wrong bank account. There’s usually no way for a bank to ‘undo’ that kind of transfer. Cyber cover can act like a sort of online ‘theft of takings’ cover, and protect you against these losses.
7: Stock Insurance
It costs a lot of money to make and hold physical stock, so when unsold clothes get lost or damaged, it can be devastating. As anyone who has experienced a flood, fire or storm will tell you, it’s like having a huge chunk of money suddenly disappear from your bank account. You have to dig deeper into your coffers to replace the stock you’ve lost just so that you can honour your orders. Months of hard-won profits can disappear in seconds.
Stock insurance exists to protect you against this kind of problem! It gives you the cash you need to produce replacement products and get your business back up and running, without driving your business into the red.
Not all stock insurance packages are the same. Some types of cover will only pay out for a certain amount of stock, and some will only cover stock kept in a secure warehouse or storeroom. If you sell your work at a lot of trunk shows or if you use a third-party fulfilment warehouse, then you need to make sure that your stock insurance is going to cover goods when they’re in transit or stored off-site.
8: Event Cancellation
Festivals and trade shows are great for business! In a single day, you can put your brand in front of thousands of customers and make hundreds of sales in record time. Sadly, as we’ve all learned over the past few years, events can get cancelled at short notice.
Event cancellation cover will pay out on any non-refundable costs you’ve had to incur as a result of a cancelled event. Any booking deposits or travel costs that you have already paid can get paid back to you. Depending on the cover, you might also be able to claim back the costs of any limited-edition clothes or merchandise that you’ve created for the event.
Event cancellation cover can be bought on its own, or it can be packaged up with other kinds of cover in a product called Exhibitor Insurance. Talk to your insurance broker about what kind of cover will be most suitable for you, and make sure that the cover you buy is fit for purpose (for instance, some event insurance products don’t cover losses linked to COVID-19).
9: Business Interruption
Business interruption insurance exists to protect you against any ‘supply chain’ or ‘operational’ problems that interfere with the everyday flow of your clothing business. It’s a really helpful type of cover to hold if you’re in the manufacturing sector.
For instance, if your fabric supplier has a fire in their warehouse, then you could run out of essential raw materials. You might not be able to make or sell any clothes until your supplier is back up and running. Business interruption insurance protects you against this kind of situation. It will either pay out on the money you have lost as a result of not being able to make products for your customers, or it will pay out on the extra money you have had to spend to source more stock at short notice.
Always talk to an insurance broker!
When trying to buy something as complex as insurance, it’s always worth talking to a broker. In the UK, insurance brokers are regulated by the FCA, and many of them are members of the British Insurance Brokers Association (biba.org.uk).
No two insurance products are the same, and it’s really important that you read and understand the fine print. If you don’t understand the language of insurance, then you just have to talk to someone who does. It might not even cost you anything to get help from an insurance broker, as many of them are paid a commission on every policy they sell.
Also, don’t forget that insurance is about more than getting a bail-out when things go wrong. It’s about reassurance, too. When you’re self-employed, it’s so important to be able to focus on making great clothes and growing your brand. You can’t afford to be overwhelmed by worry.
Even if you never have to make a claim, the reassurance of knowing that your business is protected from unforeseen events can help you sleep at night. You’ll be free to make bold choices and deliver your best work … so don’t delay — call an insurance broker right now and get it sorted!
Thanks for reading!