As a business owner, dealing with insurance can easily slide down the priority list. Not many people look forward to answering bunches of questions or filling out pages of paperwork, and nobody in their right mind gets excited about paying insurance premiums.
But what if you had a really bad day at work? What if – and it doesn’t take too much imagination – the fate of your business hinged on the cover you had in place?
Getting your insurance sorted is not just a priority. It’s the priority, and until it’s taken care of your business is in danger of financial ruin in a multitude of ways.
So let’s deal with it. To get things rolling, we’ve broken it down into five main areas:
THE SCARY STUFF – Legal Liability Insurances
Insurance is about covering for the things you couldn’t handle or afford. For businesses, above all, this means protecting yourself for Public Liability (PL) and Professional Indemnity (PI).
PL insures your business against the financial risk of being found liable for causing damage, injury, or loss to a third person or their property, and generally includes Product Liability as well. So if someone slips and hurts their back at your store, or a defective product injures a customer, you’re covered for legal costs and compensation claims. Public Liability insurance should be the number one insurance priority for every business owner.
PI insurance covers professionals who provide advice or a service against legal costs and claims for damages arising from any act, omission, or breach of duty. This is a critical form of insurance for people like consultants, engineers, accountants, beauty therapists and personal trainers. Basically, anyone who makes a living by giving professional advice in any capacity is at risk of being hit with a potentially costly suit for damages, which means coverage is essential. Even if the case turns out to be invalid, PI insurance will protect against court costs and compensation.
THE ASSET STUFF – Property, Contents and Other Insurances
This is a big basket, and you’ll have plenty of options to choose from.
Most businesses will probably need Contents to cover equipment and stock, and Building insurance if you own the business premises. Glass is also a common option for businesses that have shopfront windows, whilst Electronic Equipment and Machinery Breakdown cover are also crucial for businesses that rely on things like refrigerators and air conditioners. You can also insure against external break-ins via Theft, or internal thievery with Employee Dishonesty. And if you own a business that transports valuable goods between locations, you can even opt for Transit cover to protect them while they’re on the road.
The list goes on. If you hold large sums of money on-site that you want to cover, there’s an option for that. If you carry a lot of portable business items that have significant value, such as tools, there’s an option for that as well.
The key is to be judicious. If you can easily replace your office furniture and your stock level is usually pretty thin, you might dispel with Contents cover. The idea is to pick and choose, and tailor a unique package for your business. Cover the assets that you’d really struggle to replace, not the ones that are superfluous or you could easily restore. Cover the major bases, but keep your list tight – your premium will look a whole lot friendlier and your bank balance will thank you for it.
THE CLEVER STUFF – Cyber Liability and Tax Audit Insurance
These are the types of insurance that not everyone goes for, but are becoming more and more prevalent because they’re simply a smart thing to have.
Cyber liability insurance, especially, is becoming more and more of a necessity for the multitudes of businesses that rely on electronic data storage, operate on an online model, or rely on IT systems to be operational. Cyber protects the business against the costs resulting from data breaches that are associated with theft of information or client hacking. As cyber thieves develop more sophisticated methods – such as the recent ‘WannaCry’ ransomware attacks – small businesses are increasingly being targeted because they simply don’t have the kind of robust security systems that large enterprises can afford.
Cyber thieves aren’t hooded crooks in dark basements any more, they are well funded and well organised criminal organisations. And while insurance won’t prevent an attack, it will help you deal with an intrusion and get your system running again with minimal interruption.
Tax Audit insurance is another savvy option and provides cover for all the expenses associated with an audit by the ATO, including hiring accountants, bookkeepers, and lawyers. It doesn’t actually cover you for any fines or tax bills that might ensue, but it will afford you the manpower to competently present your case and keep your business operational.
THE INCOME STUFF – Interruption, Personal Accident and Illness Insurance
When you think about it, your ability to earn an income is probably your greatest asset. If that ability was under threat, the consequences could be disastrous. That’s why income insurance makes sense; it protects you and your family against the financial cost of being laid up for an extended period of time by covering up to 85% of your income – up to a maximum of $3,000 per week – if you’re unable to work due to an accident or defined illness. And just to sweeten the deal, premiums for income protection are generally tax deductible – as long as you’re not paying for them out of superannuation.
Business interruption is slightly different in that it covers lost revenue if your business is disrupted due to an insured event such as storm, theft or fire. Crucially, it also covers any relocation costs you might incur.
THE MANDATORY STUFF – Workcover and Compliance
Before you can consider your insurance sorted, make sure you tick the mandatory boxes. If you employ staff, you need to sort out WorkCover insurance. If the business has a vehicle, Third Party insurance is also required. And, depending on your business, you may be required by state bodies or professional associations to have certain levels of PI or PL cover in place.
AND THE EXTRA STUFF…
So that’s it, the big business insurance considerations. Before you tackle them you may also want to sit down with a cup of tea and ask yourself how you really feel about risk. For example, how much tolerance do you have for risk? Can you stomach taking chances, or would you sleep better knowing you’ve covered the crucial bases? The other question is how much capacity for risk you have – do you have access to large sums of cash to draw on if something went wrong, enough to negate the need for certain types of insurance?
You’ll also want to think about your business risks. Do you provide a service or give advice? Is there a glass shopfront to consider? Would you be able to easily replace your tools if they were stolen?
Once you’ve given it some thought, take action. Use a comparison site and look into some options. Be sure to go through the inclusions and exclusions for each policy and take note of how much excess you’ll pay in the event of a claim. You’ll usually have the option of paying monthly or annually, and whilst paying annually may be cheaper, paying monthly may be a good way to help you manage your cash flow.
The biggest mistake you can make with insurance is to do nothing. Sure, it’s a hassle – but sorting it out has never been easier. It will cost you some money, but dealing with an uninsured event will cost you a whole lot more.
About the author
Michael Gottlieb is the founder and managing director of BizCover, a leading Australian small business insurance site. He has founded a number of insurance businesses since 2001, and is featured on Insurance Business Magazine’s 2017 Hot List.’