Just in Case: Small Business Insurance

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Table of Contents

• Workers Compensation Insurance
• Third Party Personal Injury Insurance
• Public Liability Insurance
• Other Insurance
• Key Takeaway

If you run a small business, there are certain legal obligations when it comes to insurance. Some types of insurance are mandatory for Australian businesses including SMEs, and other types of insurance will be dependent on the type of business you are running, the business structure and industry your business operates. Below, we set out the requirements for small business insurance.

Workers Compensation Insurance

Workers Compensation Insurance is the key insurance policy that your small business is likely to need. In Australia, Occupational Health and Safety (OH&S) and Work Health and Safety (WHS) laws require all employers to have a workers’ compensation insurance policy to cover their employees in case of injury or illness. Each state and territory have its own workers compensation scheme and specific regulations. For example, workers compensation insurance in NSW is governed by three separate bodies: the State Insurance Regulatory Authority, Safework NSW and icare NSW, which are in charge of workers compensation regulation, WHS regulation and workers compensation insurance respectively.

Although contractors are distinct from employees, certain contractors may still be included as an employee or ‘worker’ for workers’ compensation purposes. In NSW, contractors for labour hire services are seen as an employee to be covered by workers’ compensation insurance. As it varies in different states and territories, it is best to check with your local workers’ compensation insurance body.

The only exemption to an insurance policy is if you pay less than $7,500 in annual wages and you have no employed an apprentice or trainee in your business. Otherwise, if your small business has employees, it is most likely mandatory for you to take out workers compensation insurance to protect your employees.

Third Party Personal Injury Insurance

If you own a motor vehicle, you must also pay for third party personal injury insurance, more commonly known as compulsory third party (CTP) insurance. This is required to be covered in all states and territories within Australia to provide the driver of a car cover for any legal liability in the case of injury or death as a result of a motor vehicle accident. It may also cover damage to third party property as well as fire and theft.

This insurance policy will most likely be included in your vehicle registration fee and is unlikely you will need to separately purchase it.

Public Liability Insurance

This insurance is dependent on the type of business that you are running and is not mandatory for all businesses. This insurance is needed if your business is involved in an industry where it is likely you may be liable for injuries to another person or property, although it is strongly recommended for every business.

This insurance covers the financial risk of you and your business in case of being found liable for negligence. This may include negligence relating to property damage, economic loss, non-economic loss (e.g. nervous shock, emotional distress), negligent advice, injury, sickness or death.

Being sued is often unexpected and unpredictable, hence, it is wise to have an insurance policy in place just in case.

Other Insurance

There are many types of insurance that you may also wish to be covered by, including:

• Personal injury insurance – this is to cover any personal accidents and illnesses that may happen and is particularly recommended if you are self-employed, as you will not be covered by workers compensation;
• Personal life insurance – there are various types of this insurance, including insurances that cover trauma, income protection and disability insurance;
• Building and contents insurance – to cover the building and stock of your business against fire and any natural disasters;
• Product liability insurance – for businesses that sell, supply or deliver goods in particular, this insurance covers injuries/deaths, property damage and psychological damage caused by the failure of your product;
• Employee dishonesty insurance – to cover for losses if your employee steals from you or acts fraudulently.

Key Takeaway

There are three key policies all small businesses should have. If you run a small business, factors such as the type, structure and size of your business will determine what other insurance policies and the comprehensiveness of the policies you should obtain.