Edgar Hamilton has teamed up with Eastgate Legal and Medical Services to launch a legal expenses product.
BusinessProtect is intended to provide a solution for small to medium-sized businesses with a turnover of up to £2m.
It provides a 24-hour legal helpline, manned by qualified solicitors and barristers.
It covers defence of unfair or wrongful dismissal, employment compensation awards, data protection registration applications/appeals, criminal prosecution defence, property protection, VAT disputes and court attendance expenses.
Steve Duffy, director of Edgar Hamilton & Wellard, said: "We read almost weekly about situations where individuals are taking past or current employers to court, so much so that very few businesses can afford to ignore this area.
"In the past, due to higher premiums, smaller firms felt that this type of cover was more of a luxury than a necessity, but this is no longer the case."