Insurance is essential to help you manage your business risk, hand-in-hand with good contracts and good business practices. Do you know what insurance your business may need? This article sets out the main types of business insurance for you to consider, provides assistance on choosing an insurer, and gives practical ways to minimise your business risk.
The Main Types of Insurance for Small Business
The main types of insurance for small business are as follows:
Public and Product Liability Insurance – to cover your business for liability to a third party (such as a customer) who might claim for an injury caused on your property. Examples of events which are covered include a client sustaining an injury on your premises, property damage you may cause to clients’ property on their premises, and personal injury to people using products manufactured or altered by your business.
Professional Indemnity Insurance – to cover professional services businesses e.g. an accountant, doctor or designer.
Revenue and Assets Insurance –this includes insurance for content damage, stock deterioration, loss of profits, employee theft or destruction to electronic equipment.
Worker Compensation Insurance – you need to provide injury insurance for your employees through an insurer approved by the relevant statutory body in your state or territory. This should also cover you if you work in your own business.
Motor Vehicle Insurance – you must insure all business vehicles for injury liability to third parties. There are a range of business motor vehicle insurance options such as compulsory third party, third party property damage and comprehensive.
Fire and Perils – to cover your business for damage caused by accidents or faulty equipment, including fire and flood.
Income Protection Insurance – to cover you if you are unable to work due to illness or injury.
Death and Permanent Disability Insurance – Life insurance provides a cash lump sum in the event of death. Some policies pay on the diagnosis of a terminal illness. Total and permanent disability insurance is usually an optional extra on a life insurance policy and covers against a permanent disability.
Choosing an Insurer
How will you choose insurance? You can go directly to an insurance company, your bank or building society, or you can go through an insurance broker. You will be required to disclose all relevant information to the insurance company when you make an application.
Here are some issues to consider when choosing an insurer and signing an insurance contract:
- Does the insurance broker or agent have experience with businesses similar to yours?
- Is the insurance broker or agent licensed?
- How are insurance premiums calculated?
- What can you do to reduce premiums?
- Do premiums reduce if you do not make claims?
- What is the maximum payout for a claim? What is it per item? What is it in total?
- Is an excess payable?
- Are there any exclusion clauses? How do these relate to your business?
- How can you or the insurer end the contract?
- How do I challenge an insurer’s decision if I don’t agree with it?
Manage Your Own Risks
You can manage your business risk, and minimise your insurance premiums, with practical steps including the following:
- Identify potential risks. Consider all the steps involved in delivering your product or service. What could go wrong? Can this be minimised?
- Consider ways to manage those risks.
- Do you have clear policies and procedures so your staff know how to perform their roles?
- Train your staff in safe work practices to help prevent accidents.
- Keep equipment and machinery well maintained to help prevent accidents.
- Have contingency plans. For example do you have another location that you can work if your premises are flooded or destroyed in a fire? How is information stored? It may safer to store it in the cloud/remote servers rather than on your premises.
A business lawyer can help you identify business risks and can put you in touch with an insurance broker to go through your business insurance needs.