Guide to Micro-Entrepreneur Business in France
- What is a Micro-Entrepreneur?
- Business Registration
- Social Security
- Income Tax
- Business Rates
- Status of Spouse
- Should You Elect for Micro-Entreprise Status?
- Payment of Taxes and Social Insurance
- Business Accounting
- Running a Chambre d'Hôte
- Multiple Business Activities
- Professional Insurance
13. Professional Insurance
Although adopting micro-entrepreneur status is a comparatively simple and cheap way to start and run a business in France, it does mean the owner is a sole trader, without the protective shield afforded by a limited liability company.
A change in the law in 2015 ring fenced the family home against seizure by business creditors, but it grants no such protection from a bank, from whom you may have borrowed money.
Neither does it protect you again accidents or damage caused to others.
So what types of insurance cover are available?
13.1 Professional Indemnity Insurance (PI)
Although as a general rule professional indemnity insurance (assurance responsabilité civile professionnelle) is not obligatory in France, this is not the case with certain activities, notably:
Building trades; Estate Agents; Accountants, architects, solicitors and similar; Health professionals; Transporters; Travel agents; Automobile professionals.
Since 2014 it has been obligatory for all businesses who are required to take out professional indemnity insurance to indicate on their invoices the name of the insurance and the activity covered, the geographic area covered by the policy, and the contact details of the insurer.
This type of policy covers the business owner against claims for hidden defects or other failures of the product or service, and against damage or injury caused to a third party as a result of their business activity. The policy may also be broader, covering equipment, materials and employees.
13.2 Public/Civil Liability
If you do not require professional indemnity cover, then you can take out a policy that covers your civil responsibility in the event of claims for injury or property damage. Such a policy is called assurance responsabilité civile.
13.3 Multi-Risk Policy
A broader policy short of full PI to cover damage or loss to equipment or materials, called assurance multirisque professionnelle.
Some policies will also cover third party liabilities thereby obviating the need for separate professional indemnity insurance, although this will depend on the activity.
The policies may also cover legal costs in the event of a claim, called protection juridique, but this is also generally included in a PI policy. It is also possible to take out a policy covering only legal expenses.
13.4 Decennial Insurance
In relation to the building trades, as is the case in most other countries of Europe, France has in place a building insurance system that offers a 10-year latent defects guarantee called la responsabilité civile décennale.
In order to provide a secure framework to the system, builders and architects are required to take out an insurance policy upon which they can call in should they face a claim. This insurance is called l’assurance responsabilité civile décennale.
It is a legal requirement for a builder to hold such a policy, although many smaller builders do not do so, either because of the cost of the premium, or because they only undertake small building works. Enforcement of the requirement is weak.
The policy will cover them in the event that major defects occur in their work, which compromises the strength and inseparable equipment affecting the structure of the building, making the building unfit for purpose.
This insurance must be taken out before the commencement of works, and the policy must also cover the type of works being undertaken.
In an important legal case that was considered by the French Supreme Court, the Cour de Cassation, a claim by a builder on his insurance policy was thrown out by the court as he was not covered for the type of work he had declared to his insurer.
The work undertaken by the builder was air conditioning, an activity not declared on his insurance policy.
Similar problems arise with third party (public) liability cover of builders who may be business registered for one type of building activity, but who then undertake work for which they are not business registered.
The annual cost of taking out a this cover will depend on the size and nature of the busieness activity and the scope of the policy, ranging from several hundred to several thousand euros a year, although it is possible to take out such a policy on a project basis.
13.5 Business Interruption Insurance
Such a policy covers financial losses in a business as a result of a disaster, and is called assurance perte d’exploitation.
These policies start at around €350 a year.
13.6 Car/Vehicle Insurance
Finally, if you are using your car or other vehicle for both business and pleasure, you need to ensure that it is covered for business use, with a policy that is called assurance voiture professionnelle.
Such a policy will cover goods or equipment that are being carried in the vehicle, as well as yourself and third parties.
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