Know you need business insurance but aren’t sure how to get started?
Which policy is right? How much cover is enough?
Whether you’re opening up a new business or have been in business for a while and looking to buy insurance for the first time; there are a few questions you can ask yourself upfront to help save you time and money in the long run.
After all, you’ll want to be able to sleep well at night knowing your business is adequately covered. At the same time you don’t want to be forking out money on insurance that you don’t really need.
Before buying insurance for your business ask yourself the following 5 key questions:
1. What are my business risks?
Firstly, think about your business activities. Consider the following aspects:
- The nature of your business: do you provide a professional service or give specialist advice?
- Where you do business: do you have a physical premises, is your business online, or both?
- How you do business: do your customers come to you, or do you visit them?
- The people you rely on: do you employ any staff, or rely on contractors or suppliers?
- The resources you rely on: what utilities, equipment, machinery and technology do you need to effectively run your business?
Once you have a clear picture of your business it’s time to put your pessimistic hat on to think about everything that could go wrong – the worst case scenarios. Think about what you could be held liable for; the things you can’t operate without; the assets you want to protect, and then ask yourself some ‘what if’ questions.
- You or your staff made a mistake or were negligent in providing a professional service?
- You or your staff provided misleading or incorrect advice?
- A customer, supplier or member of the public was injured due to your business activities?
- You or your staff accidently damaged somebody’s property?
- Your premises suffered a natural disaster or fire?
- You suffered damage or theft of your contents, equipment or stock?
- You lost power, water or gas supply?
- Your important machinery broke down?
- Your website was hacked or your customer data was stolen?
- Key documents were destroyed?
- You suffered an allegation of mismanagement, misconduct or breach of legislation?
- You were unable to work due to an accident or illness?
2. What types of insurance do I need?
Now that you have a fair idea of what your risks are and what you need to protect, it’s time to look at the types of policies you need to protect those things.
Also consider if there are any legislative requirements, industry body or membership requirements for your given occupation, as well as requirements under the condition of your lease.
Below is a summary of the key areas of cover available to businesses.
Public Liability insurance covers against the legal costs for claims of injury or property damage to 3rd parties due to your business activities
Professional Indemnity insurance protects businesses that provide a professional service or give specialist advice against financial losses for legal action taken against them
Business Insurance provides protection for material damage losses due to an unexpected event or accidental damage, as well as financial loss for business interruption due to an insured event
Cyber Liability insurance protects businesses against the costs associated with data breaches, being hacked or the theft of client information
Management Liability insurance covers businesses and their directors personal assets against legal costs for allegations of mismanagement, misconduct or legislative breaches
Tax Audit insurance covers professional fees for accountants, lawyers, bookkeepers and other advisers, as well as other expenses incurred as a result of an audit by the ATO
Personal Accident & Illness insurance covers you for lost income if you suffered an accident or illness that meant you couldn’t perform your usual work
There is no fixed answer to this as each business is unique however, holding the right level of insurance is just as crucial as having the right type of insurance.
First and foremost, you need to ensure that you comply with legal requirements in your state or territory, as well as limits set by your professional body and any contracts that you have. Often they will require you to have a minimum level of Public Liability or Professional Indemnity insurance however, you may decide that you need a higher level of cover than what is stipulated.
Consider how much it might cost if a claim was made against you and you had to go to court. How much compensation would you need to pay to your client and how much could your legal fees and court costs add up to? In other words, how much do you want your insurer to pay?
To help you decide when considering the amount of Business Insurance you need list all of your business assets, including any property that you own, your contents, stock and equipment. Then think about how much it would cost you to replace everything (right down to the old sofa in the corner of your office) should the worst happen. Also consider the amount of lost income should you be forced to close for a period of time and the costs of moving if you need to relocate to a new premises.
4. What are the terms and conditions of the policy?
Insurance products vary from one insurer to another so it’s important to carefully check the terms and conditions of the policy prior to purchasing, which are outlined in the PDS (Product Disclosure Statement). The PDS will state what the policy doesn’t provide cover for (Exclusions), optional cover that is available (Extensions), and any monetary limits on items that are covered.
‘Exclusions’ refer to certain acts, people, property, types of damage or locations for which a claim can’t be made. Having a large number of exclusions obviously reduces the number of risks that your policy covers. Typical exclusions may include (but are not limited to) loss or damage due to intentional acts; war or terrorism; and events that occur outside territorial limits.
An ‘Extension’ provides cover for losses that fall outside of the normal conditions of the policy which comes at an additional cost. For example, electricians that work in Queensland are required to purchase the Consumer Protection extension when taking out Public Liability insurance which covers defects in the work they provide.
‘Limits’ or ‘Sub-limits’ refer to the maximum amount payable for a particular event or item that is covered under the policy. Business insurance policies commonly contain sub-limits, for example, a property that is insured for $1 million dollars may include a sub-limit of $100,000 for claims arising from flood damage.
5. Where can I buy business insurance?
Researching the market can be a time consuming process, but thankfully there are a few options when it comes to buying business insurance including, going direct to an insurer, paying a fee to talk with a broker, or using an online comparison site which allows you to shop around for free and compare policies from several major insurers in the one place.
If you’ve already worked out what your business risks are and what types of policies you need, an online comparison site offers a simple and straightforward process whilst giving you control over the process yourself. But firstly check to make sure live agents are available to talk directly to in case you need assistance and also find out the process should you need to make a claim. After all, the last thing you want is a long and complicated process, so try to find a provider who will sort it out for you whilst keeping you updated along the way.