As a small business owner, you know all too well that the fate of your business is in your own hands. But did you also know that as a company director or senior manager involved in the management of a company, you also carry specific responsibilities that have the potential to also leave you personally liable if things in your business don’t go as planned.
This is because as a business owner, you are liable for all aspects of your business. In worst-case scenarios, this could not only cripple your business, but also your personal finances too.
However, there is a type of business insurance that can help to reduce this risk. It’s called Management Liability insurance and it may be worth considering for small business owners, directors, or managers looking for an additional layer of protection for their business – and their personal assets. So, what is Management Liability insurance?
Management Liability insurance is an insurance package that includes a suite of business insurance products that together help protect your business from the risks associated with running a business. Management Liability insurance matters because investigating, defending, and settling third-party claims can be costly, time-consuming, and potentially damaging to your reputation and the reputation of your business.
Management Liability Insurance explained
There are generally seven individual types of business insurance that may be included in a Management Liability policy, as outlined below.
1. Directors Liability Insurance: Protects directors and officers from claims of actual or alleged wrongful acts in their role as a director or officer. If the company indemnifies the director or officer for such liability, it will be entitled to cover under the Company Reimbursement section of the policy.
2. Corporate Liability: Protects your business against claims of alleged or actual wrongful acts by it (as opposed to claims being made against the directors or officers).
3. Employment Practices Liability: Employment Practices Liability (EPL) Insurance helps employers reduce the risk and potential cost of claims taken against them by employees. Covered claims may relate to allegations of discrimination, unfair dismissal and sexual or workplace harassment.
4. Statutory Liability: Statutory Liability insurance is cover for small business owners for fines, penalties, and legal representation to defend against allegations of some legislative breaches, such as investigations and prosecutions by WorkSafe.
5. Tax Audit: Covers the company associated with a tax audit by the ATO, such as accountancy fees.
6. Cyber Liability Insurance: Cyber Liability insurance helps protect your small business from claims and supports your profitability in the event of a cyber breach or attack. Costs related to defending a cyber claim are also covered.
7. Superannuation Trustees Liability: Cover for liability arising from any actual or alleged act, error or omission with respect to a superannuation plan; or arising solely because of any person’s status as a Superannuation Trustee.
5 key considerations when purchasing Management Liability Insurance
1. You are not too small to be at risk
While it’s true that Management Liability claims tend to be more expensive for larger businesses, the truth is that all businesses regardless of size can be exposed to management liability risks. Management Liability insurance covers you for any claims that could arise from your management decisions and actions, regardless of what type of business you own or operate.
As a small business owner or an SME, you have the same legal obligations as large corporations. You are responsible for meeting your legal obligations as a business owner or a member of the senior management team.
2. Know your risks
Although it may seem obvious, understanding your business risks is key to minimising them. The liability landscape is vast and includes standard responsibilities of a business owner such as legal, workplace health and safety, and superannuation requirements. It also includes the responsibilities you have to your customers, lenders, and investors (if you have them).
Business owners and managers operate in a highly-regulated environment when it comes to risk management. As such, proactively reducing your exposure to risk via business insurance such as Public Liability insurance and Professional Indemnity insurance may be something that you consider.
3. Don’t confuse Management Liability and Professional Indemnity Insurance
Although there are similarities between Management Liability insurance and Professional Indemnity insurance there are also important differences to be aware of. To get down to brass tacks, Management Liability insurance covers the running of your business, while Professional Indemnity insurance covers your professional activities.
And while Professional Indemnity insurance may be customised for individual businesses, Management Liability insurance typically there are seven individual areas of coverage.
4. Be aware of exclusions
Every type of business insurance product comes with exclusions, and that includes Management Liability. There can be limitations on the coverage you receive, just like any other insurance policy.
As such, knowing what you will be covered for and what you won’t be covered under the Management Liability you choose is critical. Some common exclusions in Management Liability policies may include anti-competitive behaviour, product liability, asbestos claims, and pollution.
5. Regularly examine your cover
As with all things in business, setting and forgetting when it comes to your Management Liability insurance is very rarely a good idea. Your liability management requirements can change as your business changes, so it is important that you review your Management Liability coverage regularly.
Business milestones such as undergoing significant growth, winning a government contract, employing staff, or even submitting a Management Liability claim may introduce new liabilities to your business. As such, when it comes to business insurance a good rule of thumb is that when the circumstances in your business change, review your insurance – which may also need to be updated in order to maintain the same level of cover.
Management Liability Insurance made easy with BizCover
At BizCover, we make purchasing your Management Liability insurance quick, easy, paperwork-free and drama-free. Our innovative online platform enables you to compare competitive Management Liability insurance quotes from leading insurers in an instant and purchase your Management Liability insurance in 10 minutes.
To learn more about Management Liability insurance read our Management Liability insurance Fact Sheet or visit our online destination for Management Liability insurance to compare competitive business insurance quotes, get covered in only 10 minutes, avoid paperwork, and get back to business. If you prefer to speak with us, you’ll reach our friendly team on 1300 920 867.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
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ABN 68 127 707 975; AFSL 501769