Insurance. Sure, just hearing the word can be anxiety triggering if you’re new to the concept but having the right insurance for your business is not only essential in helping you manage your risk and success – in some cases it’s legally mandatory.
Business insurance protects not just your physical assets, but also members of the public, your employees, yourself and your brand against loss, damage, injury, death, legal defence costs, some civil fines and penalties and much more.
First know your risk
The first step to truly understanding the value and importance of business insurance is understanding exactly what your business risks are.
Are you a bricks and mortar business that needs to protect stock, machinery and equipment? Or are you a consulting firm who may need to protect against negative impact resulting from your advice or services? Before you launch into comparing quotes and packages, take the time to conduct a risk assessment on your business. There are plenty of great tools and templates available online to help you – just make sure it’s from a neutral party like business.gov.au rather than an insurance firm. If you can afford it, there are also plenty of third-party risk management consultants who can help with the assessment and advice on what you should have in your policy.
Choosing your policy
So, you have now assessed the risk to income, financial stability and the brand of your business, next comes choosing your policy. A lot of insurance companies will have standard business insurance packages available that are essentially off the shelf solutions. These can be a good way to get started, however if you are a small or niche business these may include coverage for things you don’t need. On the flip side, if you’re a larger business, these off the shelf policies might not give you enough coverage.
Here are a few of the most common policies all business owners should have or know about.
Workers compensation
Workers comp protects you if an employee is injured or suffers a loss while at work. In Australia Workers Compensation Insurance is mandatory for all employers apart from a few exemptions.
Who should consider it?
Any business owners with employees, unless you meet the few exceptions. Check out your specific state rules as legislation can differ between Australian states and territories.
Compulsory Third Party Insurance
If you own or operate a vehicle it’s compulsory to have third party insurance to protect you against damage or injury in the event of an accident. Third Party Insurance is often covered in registration fees, however it’s essential you check, depending on your state.
Professional Indemnity
Professional Indemnity covers you for legal action taken against you for injury, loss or suffering caused to an individual as a result of receiving your service or following advice provided by you.
Who should consider it?
Anyone who provides advice or consultation as all or part of their service.
Public Liability
If you are a contractor, individual, event, business or even public building you are at risk of being held liable for injury, death, damage or economic loss as a result of negligence. Public liability insurance protects you even if you are sued by a third party for negligence and/or damages.
Who should consider it?
Public liability is compulsory for some businesses and industries in Australia however it is recommended for most businesses, and usually a core insurance included in business insurance packages.
Management Liability
Management liability insurance protects against claims of loss or damages as a result of wrongful acts from the company or its directors. Examples of wrongful acts include fraud, misappropriation of funds, sexual harassment and unfair competition amongst many others.
Who should consider it?
Company directors and senior management teams, companies that have more than 2 employees and private companies.
Building and Contents Insurance
Much like your house and contents insurance, Building and Contents protects against loss or damage of your premises and its contents. Building and contents generally protects against things like fire, flood, explosions, malicious damages and storms. Each policy will have its own list of inclusions so make sure you read the details of your coverage and take into account your geographical environment and risk.
Who should consider it?
Anyone with a bricks and mortar business. If you operate a home business don’t assume your house and contents will cover you for goods and products stored on the premises, look into the details of your cover in case you need specific business insurance.
Maintaining your policy
Once you’ve settled on an insurer and a policy, it’s important to know what to do to maintain a good price and ensure you’re not paying too much. There are a couple of key tips to making sure you’re in the best placed position to negotiate on price;
- Always pay your premiums on time: most providers are meticulous and have little mercy for late payments. Not only will late payments likely impact your future insurance costs, it will have a negative impact on your business credit score. For more information on why this is a bad thing, read our guide on building a strong credit profile.
- Be responsible with your equipment/assets: if you’re insuring equipment, machinery, vehicles and buildings ensure you’re up to date with all maintenance and services and are complying with health and safety regulations.
- Keep your insurance up to date: it may be tempting to keep quiet about additions to the business that will increase your costs (such as new staff, products, building renovations etc), but it’s essential you’re open and update your policy. It might save you on premiums in the short term to stay quiet, but it may come back to bite you.
