Business Insurance - Are you at Risk?
There are so many things to think about when you start a business. One of the most important things to consider is what insurance you will need. The types and amount of insurance required will depend on the type of business you have, your product or service, and how you deliver your product and service. Insurance can be confusing for first-time business owners and you don’t want to find yourself underinsured.
What is business insurance?
Business Insurance is the general term to describe insurance the covers your business for losses due to events that occur during the running of your business, there are many different types of business insurance that cover business property, legal liability, and employees. When a new business owner is looking at what insurance it needs it is important that you have a good understanding of all aspects of your new business and what it plans to do now and, in the future, so you can determine what insurance is needed.
As a starting point, there are insurances that are required by law:
Public Liability Insurance
Professional liability insurance insures against negligence claims that result from mistakes made by the business in the delivery of its products or services. Each industry has its own unique requirements when it comes to Public Liability and business owners should engage a professional for advice. If you need guidance, reach out to a Fox Group Accountant for a referral to an insurance professional.
Worker's Compensation Insurance
Workers compensation insurance is compulsory for most employers in Australia and covers your business for financial costs you may be liable for when a worker sustains a work-related injury or illness. Support may include one-off lump sum payments, income replacement, medical and rehabilitation expenses, and support for workers to return to work. It isn’t just employees that need to be covered by worker's compensation insurance, in some cases, it extends to contractors.
There is other business insurance that is not compulsory but make good business sense to have in place to manage business and personal risk:
Building and Contents Insurance
As with your family home, it is good practice to insure the building you run your business from and the contents such as equipment and even stock. When it comes to protecting buildings, equipment, and stock there are different type of insurance available such as:
• Building and contents
• Burglary insurance
• Deterioration of stock Insurance
• Electronic equipment Insurance
• Farm insurance covers things such as crops, livestock, buildings, and machinery.
• Goods in transit Insurance
Note – Home Based Businesses - Homeowner’s policies don’t cover home-based businesses like commercial property insurance covers businesses. If you're operating a home-based business. You will need to seek additional insurance for your business equipment and stock.
Professional Indemnity (PI) Insurance
Professional indemnity insurance helps cover the cost of legal action due to your professional advice. It may cover breaches of contract such as:
• not achieving the results of a contract
• providing negligent advice
What this insurance looks like is different depending on the industry your business is in but essentially if anyone is paying you for advice or for a result and they suffer a financial loss resulting from negligent advice or unfinished work, you may be financially liable.
Cybercrime and Technology Insurance
With cybercrime increasingly targeting businesses, it is important that business owners manage this risk. There are several insurances that are relevant to technology and cybercrime:
• Electronic equipment insurance will cover your electronic items from theft, destruction, or damage.
• Cyber liability insurance protects your business against cybercrime. This insurance covers the cost of keeping your data secure as well as the expenses from the disruption to your business.
Product Liability Insurance
If your business manufactures products to sell, product liability insurance is particularly important. Any business can find itself named in a lawsuit due to damages caused by its products. Product liability insurance protects a business in such cases.
Business Interruption Insurance
Business interruption insurance is designed to protect your business against any financial loss caused by insured events like fire, flood, and theft. It ensures that the business can cover any lost profits and additional expenses during the length of the claim. For example, if there is a flood and the business is unable to open its doors, business interruption insurance will provide for the loss of income during that period.
Key Person Insurance
You can insure a key person in your business against trauma, illness, and death, The key person may be the owner or an employee that the business relies heavily on.
Tax Audit Insurance
The Australian Taxation Office (ATO) can audit any individual or business to verify the financial information provided is real, true, and correct. Compliance audits, especially those relating to Payroll Tax, are common. As even the smallest of tax audits can be time-consuming, tax audit insurance is intended to help cover the costs your business incurs when it’s being audited by the ATO.
Every business has different insurance needs, and all business owners have a different approach to managing risk in their business. If you are unsure about your business’s insurance needs, reach out to one of our experienced Accountants to assist you. We work closely with several insurance brokers that have helped many of our clients with their insurance needs.