As of 2016, more than two million businesses are operating across Australia, according to the Australian Bureau of Statistics. With so many businesses operating at once, there’s plenty of interest in the subject of business insurance. Different products can potentially cover your company when a customer is injured, if bad advice is given, or if an employee becomes seriously ill. In short, it can mean the salvation of a business under fire, so long as the right policy is in place.
However, new operators may be confused by the plethora of options out there. So, let us help you understand how a business insurance policy protects your livelihood.
What is business insurance?
Business insurance protects your business from different risks. If your staff gets ill or injured, if a customer has an accident, or if vital equipment is stolen or destroyed; the right insurance policy covers costs you’d normally be unable to pay, and can shield you from the high costs of litigation.
Let us explain with a few examples.
- A consultant gives their client bad advice. As a result, the client loses money on an important business transaction and ends up in financial hardship. Professional indemnity cover will cover the business for the cost of legal action due to the consultant’s actions/errors as well as any compensation awarded to the client.
- The chief strategist at a firm is seriously injured while off-duty. Their work is considered vital to the continued operation (and growth) of the business. Due to their injury, this individual is unable to work for the foreseeable future; costing the business a lot of key person insurance can address this loss of revenue with a claim.
- A customer trips inside a cafe, breaking their hip. Public liability insurance will cover the costs of their injury, as well as any other fees owed as a result of legal action.
- Bad weather causes significant damage to a clothing store. Not only will building and contents insurance cover the cost of repairs and stock replacement, but – if the operator has also taken out cover for business interruption – they can close their doors for an agreed timeframe as they need to make any necessary repairs.
Some types of business insurance are not optional. For example, any business that has employees is obligated to have workers’ compensation cover, and any who require their employees to operate a motor vehicle require those workers to be covered by compulsory third party insurance.
Conversely, a solo-operated business, will not need workers’ compensation cover* (it covers employees, not sole traders), but may require something unique for their operation; like cyber insurance or product liability insurance.
Many businesses (e.g. restaurants, shops, workshops) will need typical insurance products to protect against events like property damage, natural disasters, theft of belongings, etc. This is crucial for businesses run from homes, as a policy that covers your personal belongings does not necessarily cover business assets.
* That said, a trauma/TPD/income protection insurance policy would be a sensible investment.
Taking out new cover, and renewing existing policies
Insurers can roll several types of business insurance together, or you can cherry pick one or two types of policy to suit your needs. You should know, however, that it’s not just the different types of cover that affect the price of premiums.
Premiums are calculated based on a number of factors:
- What your business does
- Who your business interacts with
- Operational risks
- Business size (e.g. assets, how many employees, income)
- History of claims
It’s possible to secure a discount on your insurance policy, perhaps if you take out multiple policies through the same insurer or have a history of not claiming. You won’t know the true cost of cover until you begin comparing your options.
If you’re renewing your policy (which you’ll typically do every year), it’s important to reassess your business’s situation to guarantee the updated policy adequately covers your risks. Does the policy need to reflect new stock or equipment? Have you hired new employees? Is your business more susceptible to failure if an interruption halted operations? Business insurance is not a ‘set and forget’ product – it requires you to reassess your cover regularly.
Why take out business insurance?
There are plenty of good reasons to take out business insurance. The only one that matters is this: it protects your business against serious financial hardship. Any business owner will tell you that ‘risk’ is an unpleasant reality of starting your own business. Even when you’re not in danger from competitors, a host of problems could occur that put a dent in even the most successful enterprises. Having the appropriate level of insurance will help your business continue to operate despite these risks.
Another significant advantage of business insurance is that premiums are tax deductible, provided that those premiums go towards protecting your business’s ability to earn income. Additionally, you are also able to claim a “partial or full credit for the GST included in the premium”, according to the Australian Taxation Office.3 You can learn more about this from the Australian Taxation Office, but we highly recommend you speak to a licensed tax accountant to ensure your return is done ‘by the book’.
How to claim
Here is a summary of what you will need to do in the event of a claim.
- Call the emergency services if necessary. Report to police any thefts, damages, or loss of property. Take whatever reasonable measures necessary to recover your lost belongings and minimise harm.
- Get in touch with us as soon as possible. Whether it’s over the phone or Get the process started as soon as possible by completing the relevant claims form and provide the required details. We will then speak to the insurer on your behalf.
Until you’ve spoken to us, do not
- admit liability for an incident,
- agree to settlement terms,
- organise repairs or replacements for stock, tools, etc.
Still stumped? The best way to figure out exactly what your business needs is to let the experts help. We’ll ask you a few simple questions about your business, and help you pick cover that comprehensively protects your business.
Best of all, our service is free to use! It couldn’t be easier to compare business insurance.