In such circumstances it makes perfect sense to mitigate and or manage risk where possible by reducing uncertainty and protecting your business.
Business insurance is capable of not only protecting your assets, equipment and machinery that keep your business operating but can also protect your employees and customers from risks which you may face.
Furthermore, an appropriate insurance policy can provide you with the necessary financial support if your business is affected by unexpected circumstances.
In this two part series on business insurance we look at the types of insurance policies available, important year end check lists to ensure you are adequately covered, specialised needs and policies, how premiums are calculated and how you can save and home based businesses and the policies available in this area.
At the outset it is important to highlight that there are a diverse range of different insurance products and policies which aim to cover tradespeople, small businesses, professionals, those operating in hospitality and many more.
Insurance companies provide a variety of policies that cover small businesses, tradespeople, professionals, hospitality operators and more. It is therefore pertinent that you familiarise yourself with the kind of policy that your business requires.
Which business insurance policy suits me?
In today’s ever-changing business environment customisation is fast becoming the go-to approach for business insurance. Many insurance providers offer tailored business insurance policies and or industry specific products. Often as a first step it may be wise to speak with your industry association to find out if they recommend a policy, product or provider.
It is important to note that most pre-packaged policies are not suitable for all small businesses. Every small business’ insurance needs will vary greatly depending on their trade, and industry. By way of example, the risks involved in running a plumbing business will differ significantly to a home based website development business.
Are some business insurance policies compulsory?
The short answer is yes, in most Australian businesses. Specifically, workers’ compensation policies which cover such events as an accident or sickness are compulsory and as such need to be obtained.
Furthermore, if you operate a work vehicle Compulsory Third Party Insurance or CTP which covers claims made against your business for personal injury arising out of the use of your work vehicle is mandatory.
You should consider other forms of motor vehicle insurance to cover other risks and liabilities, such as damage to property or your own or another person’s vehicle.
It is worth noting that each State and Territory has its own Workers’ Compensation and CTP Schemes. In NSW the following links will provide further information:
Common types of business insurance
Common types of business insurance focus on assets and revenue, liabilities, and personnel. These include:
Professional indemnity/liability
Protects you from legal action taken against you if someone suffers a loss after following your professional advice or as a result of your receiving your service.
Property
Covers damage or loss to buildings, contents and stock caused by insured events and accidental damage.
Theft and burglary
Theft insurance generally covers your business against loss or damage to your stock and contents if someone forces their way onto your premises, or uses deception to get in to your premises. It usually does not cover cash losses, which can be covered separately.
Public Liability
Covers your business for legal costs and compensation costs that you might have to pay if you are found liable to someone because you caused death or injury, loss or damage to their property, or economic loss due to your negligence.
Product liability
Businesses that supply, deliver or sell goods, even in the form of services or repairs, may need cover against claims of goods causing damage, injury or death. Product liability cover protects you if any of these events happen to another person or business by failure of a product you are selling.
Money
Covers your money for theft at the premises, in transit and at your private residence.
Tax audit insurance
Covers costs incurred by your accountant, or registered tax agent, when notified by the Australian Taxation Office to conduct an audit or investigation into your tax liability.
Business interruption
Covers businesses that suffer a loss because they cannot trade for a period due to loss or damage from a weather event, flood, fire or other insured interruptions.
Deterioration of stock
Covers businesses for the deterioration of chilled, refrigerated or frozen goods and stock if a refrigerator or freezer unit storing these goods breaks down and spoils the items.
Employee fraud or dishonesty
Covers against fraudulent or dishonest actions committed by employees that directly results in loss of money, negotiable instruments or goods.
Machinery/Equipment breakdown
Covers machinery and equipment used in your business. Some policies may also cover stock damages as a result of the breakdown
Goods in transit/property in transit insurance
Covers the loss of, or damage to, goods you buy, sell or use in your business when they are in transit by road, rail, air and sea. It also covers damage to property – such as tools and equipment – while in transit within a defined set of geographical limits
Computer and electronic equipment
Covers accidental damage or loss to computers and electronic equipment and data
In our next issue of business insurance fundamentals we will touch on end of financial year business insurance checklists, premiums and how you can save as well as home based business insurance and the pitfalls that you should be aware.
Mani Shishineh is the Principal Solicitor at Legalbit, you can find out more by visiting www.legalbit.com.au
or calling (02) 4335 4952
