Insurance basics for your small business

Business insurance can look complicated but once you understand the basics, you’ll find it much easier to talk to your broker or adviser about your needs.

Here are five things it can help for you to know.

Your cover should be tailored for you

Business insurance can help protect a number of things including your company assets, customers, employees, and your business earnings.

It may also include public liability insurance to provide protection against claims relating to injuries or damage to property.

Business insurance can be flexible. For example, a sole trader working from home is likely to have different requirements from someone running a restaurant, a building company or even a yoga studio, and so it can be tailored to suit a variety of different business needs.

This can also mean bundling different types of policies together to simplify the process – and a bundle may also cost less than purchasing the policies separately.

What’s the difference between mandatory and optional insurance?

Some elements of business insurance are required by law. For example, if you have employees, you must have workers’ compensation insurance. Public liability insurance is also compulsory for some companies.

“This can also mean bundling different types of policies together to simplify the process”

Depending on your business requirements, you can add others to suit your own preferences such as income protection, disability insurance, or cover for your premises, vehicles or equipment.

What is business interruption cover?

Australia’s recent catastrophic floods brought home the reality that, sometimes, businesses are forced to close.

If a disaster forces you to shut down your business, business interruption insurance can help it to survive by covering lost income and continuing costs such as rent and wages.

When considering this insurance, you may come across the terms ‘indemnity period’. This is the length of time the insurer will continue paying your claim. The standard time is 30 days, though some insurers offer the option of longer periods.

The time you need for recovery will depend on a number of factors. For example, if your business is built on a critical piece of equipment, you should consider how long it would take to replace it, particularly if it’s manufactured overseas.

Scope of cover

Whether bought together or separately, each policy will set out exactly what it covers, any conditions you must adhere to and any exclusions.

For example, conditions could include installing automatic fire extinguishers or agreeing to switch on burglar alarms whenever the business premises are unoccupied. An exclusion eliminates coverage for certain types of risks – for example, damage that occurred because you failed to maintain the premises.

Business insurance has lots of options and every business has different exposures – so how can you be sure you’re covering the right risks?

Your broker or adviser uses a tool that can identify your exposure based on claims by other businesses in your sector. From there, they can help to fine-tune your risk profile by understanding the way you do business and the mitigations you have in place.

So, get in touch with your broker or adviser, who can also help you to decide on the amount you should insure by discussing details such as replacement costs, especially when it comes to buildings and equipment.

These may appreciate over time due to inflation and rising costs as new models are made available. The exception is stock, which can be covered for its value rather than for its replacement cost.

Do you have the right cover?

Getting it right means finding the right cover for the best price. For peace of mind, contact your broker or adviser today to discuss your business insurance needs.


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