Navigating business insurance

Must-have insurance

Public liability and workers’ compensation insurance are some of the most important covers for small businesses. Although the laws vary from state to state, in Amanda’s view, any business that employs staff, has contractors, uses suppliers and has clients must have these insurances.

Amanda Carrar, Adviser Director with financial advice business Wealth Planning Partners explains that although workers compensation insurance / WorkCover is compulsory if you have employees, it doesn't cover company directors.  Instead, Amanda recommends that directors get personal income protection insurance.

Amanda also adds that property insurances aren't always compulsory, but lease or bank conditions may require it. Ensure that you seek advice from a qualified financial advisor to ensure you get the required insurances. 

Additional insurance

James Douglas, Principal of law firm LegalVision explains a number of other forms of insurance are important to have in place to properly protect a business.

“There are many circumstances in which goods or services a small business creates or sells could cause injury, death or damage,” he says.

James suggests that it is important to have product liability insurance if a business is supplying or producing services and products.

He says small business owners should also consider professional indemnity insurance if the business provides professional services. This includes lawyers, accountants, doctors and architects.

James also suggests that you check with your relevant professional organisation as to what insurances may be needed as some professional bodies may require the business and its employees to have indemnity insurance.

More than the basics

While these are the basics when it comes to insurance, James says there is a range of other insurances many small businesses need to consider such as:

• Revenue and assets insurance. This protects against stock deterioration, property damage including fire and flood damage and loss of profits, employee theft or destruction to electronic equipment and business loss or loss of profits
• Personal accident and sickness insurance. An insurance that provides protection for business owners if the business has no employees and the owner isn’t covered by workers compensation
• Death and permanent disability insurance. This provides a cash lump sum if the policy is triggered

Many insurers package up a range of different insurance policies under a business package tailored for the entity’s unique circumstances. It’s worth talking to an insurance broker who can provide advice on the right insurance for the business’ needs and also negotiate the best price for policies.

Seeking advice

To ensure the business has the right cover for its individual needs, James says in the first instance it’s an idea to examine the cover being offered and the insurance company.

Then find out three main things:

1. How much the insurer will pay out in the event of an insurance claim
2. Excesses that are payable and what exclusions apply to the insurance and the business
3. Formulas used to calculate premiums and how the business can reduce premiums

“Compare a number of different written quotes before making your choice,” he advises.

It’s also an idea to undertake a risk assessment to ensure insurance properly addresses the business’s financial situation. This includes identifying potential risks, investigating strategies to manage and minimise those risks and implementing systems to prevent and reduce accidents.

“Properly training and providing guidance to employees to reduce risks and making sure equipment and technology is maintained are other ways to help reduce business risk,” says James.