The lack of limited liability and the requirements of French law
frequently requires that a small business owner needs to take out 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?
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;
- 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.
Those in the building trade need to take out a specific decennial policy, described below.
The annual cost of taking out a this cover will depend on the nature of the activity, size of the business, and the scope of the policy, ranging from several hundred to several thousand euros a year.
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.
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.
Builders have a 10-year obligation covering major works carried out on a property, for which purpose they are required to take an assurance décennale.
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.
The cost of such a policy is at least several thousand euros a year, although it is possible to take out such a policy on a project basis.
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.
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.