However, getting business insurance means you can safeguard against the worst outcomes while protecting the integrity of your operations. Here are five things you need to know about business insurance.
1. What is business insurance?
Like every other type of insurance you might already have (e.g. life insurance, income protection, car insurance), business insurance is a dedicated policy that protects you and your company against losses. Depending on the policy chosen, your coverage might specifically protect you against damage to your physical office or store, your employees or your customers.
Everyday life can be unpredictable and things like theft, stock damage, fire and machinery breakdowns can seriously impact your ability to run a business. That means that, unless you have the right business insurance, you may be hit with significant costs should the worst occur.
While taking out business insurance is an ongoing cost, the protection it provides is worth the monthly premiums to ensure your workplace operations run smoothly.
2. What are the different types of business insurance to consider?
The sheer volume of policy options on the market can feel overwhelming. But since there’s a wide variety of industries to cover, there simply needs to be a diversity of policies. Generally, however, the main business insurances are:
- Professional indemnity: protects you if someone suffers a loss (financial, reputational, etc.) due to a service you provide or after following your advice.
- Public liability: covers against costs due to negligence causing death, injury, property damage or economic loss.
- Business interruption: if you are unable to operate due to circumstances beyond your control (e.g. severe weather event, flood or fire), this policy will cover your losses. It may even cover against a pandemic like the coronavirus crisis.
- Property damage: covers against insured events that result in damage to your workplace, stock and contents.
- Theft and burglary: covers for loss or damage to any of your business contents (including stock) due to someone getting into your workplace illegally or deceptively. This usually doesn’t include losses for stolen cash but there are separate policies covering this which you may wish to bundle together.
- Workers’ compensation: covering employees in case of work-related injuries.
- Directors and officers (D&O) insurance: protects the assets of corporate directors and officers if they’re sued by employees, customers, vendors, competitors, shareholders or other relevant parties.
If your business operates in a dangerous or risky sector, you may wish to take out more niche business insurance. These may cover:
- commercial vehicles
- tax audits
- product liability
- deterioration of stock
- employee fraud
- cash
- machinery breakdowns
- damage to computers and electronic equipment
- goods in transit.
3. WHAT IS COMPULSORY BUSINESS INSURANCE?
Typically, businesses will need to take out three compulsory insurances in Australia: public liability, workers’ compensation, and third-party personal injury.
Public liability insurance is most often used to cover the legal costs and compensation if your business negligence causes economic loss to someone. However, this insurance also financially covers you if that negligence leads to loss or damage to property, injury or even death.
Workers’ compensation insurance is essential across Australia for businesses with a certain number of employees. The rules surrounding this compulsory insurance are different depending on the state or territory you operate in, so contact the appropriate regulator through the Fair Work Ombudsman.
Finally, third-party personal injury insurance is compulsory for every business owner who owns a vehicle and uses it for work. It’s also compulsory for every Australian on the road. The good news is that this insurance is generally bundled into your annual registration fee, so you likely won’t need to think about it.
Note: These insurance products are not compulsory for every business type. A sole trader with no employees, for example, doesn’t need workers’ compensation insurance – although there’s a number of other things you need to manage. Speak to your financial advisor if you’re unsure of your insurance obligations.
4. How much does small business insurance cost?
There’s no ‘umbrella cost’ for business insurance – it will depend on a variety of factors including:
- your industry
- the policy types applying to your business
- the type of work you do
- the amount of cover needed
- your location
- any operational risks
- your history of previous claims.
Once you’ve chosen your insurer and your policy, you have to pay premiums to keep it active and renew it annually.
If your circumstances change during that period, you need to inform your provider to ensure you are adequately covered against any risks.
5. What should you do in the event of a business insurance claim?
If you need to make a claim, there are a few important steps that can keep you protected:
- Contact emergency services when needed: if there’s been a serious incident such as theft, fire, or a workplace injury, your first step should be to call the police, fire department or ambulance.
- Speak to your insurer: it’s important to get the claims process started as soon as possible, so reach out to your provider and advise them of the situation to receive advice on the next steps to take.
Business insurance is a smart investment that could save you a significant sum of money and help keep your business running if the worst occurs, so it’s well worth the additional admin time.
Disclaimer: The guidance provided is general in nature. The guidance is factual information only and is not intended to be financial product advice, legal advice or tax advice and should not be relied upon as such. The guidance has been prepared without taking into account your personal objectives, financial situation or specific needs. Before acting on any guidance you should consider the appropriateness of the guidance having regard to your objectives, financial situation and needs. Before making any decisions, it is important for you to consider these matters and to seek appropriate financial, legal, tax, accounting and other professional advice.
