Business in Australia continues to thrive, despite the many challenges over the previous years. In particular, small businesses are leading the way. By definition, a small business has fewer than 20 employees, and about 98% of Australian enterprises are considered small businesses. Each year, more and more small businesses emerge in the country.
Overall, it’s a great time to engage in any industry, despite the fierce competition currently going on.
Not all small businesses endure the tough market, however. Many have to stop operating after their first year – or even before that. In order for a small business to survive and prosper, it’s essential to have insurance.
Small business insurance provides protection from potential hazards that the entity may face. Risk is everywhere, and an unfortunate event can happen anytime. If it strikes and the business is unprepared, it can have devastating effects, from the business finances to its reputation. A comprehensive small business insurance package is a silent partner of any business, regardless of the industry. It’s always ready to jump and come to the rescue. It’s the difference between a business that rises above and one that sinks to the bottom.
But what is business insurance exactly?
Simply put, insurance protects businesses from losses, which may be due to events occurring during the natural course of operations. Many insurance types exist for small businesses, which we will discuss below. To know which kind of insurance a specific company needs, an evaluation can be performed. This evaluation will help the business determine the protection requirements of the business based on potential hazards. Typically, the risks depend on the environment where the company operates.
Business insurance aims to protect equipment, assets, property, employees, and the business. However, it is important to note that there is no all-encompassing policy that covers everything. That is why the type of insurance you need will vary depending on the business you operate.
Some companies require more extensive coverage than others. For example, a delivery business owns a fleet of trucks, which should be insured. Dentists with state of the art equipment will need insurance, for sure. On the other hand, a florist with inexpensive tools may opt for minimal insurance. Every business’ circumstance is unique, which is why it’s vital to pick the proper coverage. What matters is that the small business insurance fits like a glove – not too big and not too small, but just enough coverage for all assets and potential risks.
Which Business Insurance Should You Get?
For small businesses in Western Australia, it is imperative to have two types of insurance:
Professional Indemnity insurance is designed for professionals who provide a specialist service or advice, providing protection for financial loss and legal costs of a claim.
For small businesses in Western Australia, it is imperative to have two types of insurance:
Workers’ Compensation Insurance is required for businesses with employees, no matter how many you have. Your staff can get sick or get injured while working, which is your responsibility. Since it’s a costly expense, having workers’ compensation insurance helps pay for the medical costs and replaces lost wages, as well.
Motor Vehicle Insurance is a compulsory type of insurance for all businesses that operate one or more vehicles. This insurance is required when registering a car. It provides protection from claims due to injuries relating to the use of your company vehicles.
It is recommended that you buy additional coverage for property damage since Motor Vehicle Insurance does not cover damage to your vehicle.
Three Types of Small Business Insurance Everyone Needs
The two types of insurance mentioned above (Motor Vehicle Insurance and Workers’ Compensation Insurance) are prerequisites for running a business. Aside from them, there are other types that you will encounter and may consider as you go along. We categorise each company’s need for protection into three areas, which are:
Assets and Revenue
Let’s take a look at how you can protect your assets and revenue through insurance first. In this category, your goal is to ensure that all assets are safe and covered in case of damage, theft, or loss. The coverage you require will depend on what you aim to protect, your business environment, and your transactions.
Suppose you operate in an office building. In that case, you may want to have Building and Contents Insurance, which covers machinery, computers, inventory, and raw materials. This insurance may also include leased property, which you are contractually obliged to insure.
Another type of insurance that provides protection for your assets and revenue is Cyber Liability Insurance. It’s a must, especially with small businesses using computers to send and receive electronic data. Most of which contain sensitive information, such as tax records, sales projections, and contingency plans that are crucial to your company. If those pieces of information are lost, stolen, or damaged because of a security breach, restoration is often difficult and expensive.
In some cases, data breaches, unfortunately, can trigger claims or lawsuits. Some data may include personal information, such as health records, social security, and credit card numbers. It’s pertinent that you protect your business against these claims, which can be extremely costly. That’s why you need Cyber Insurance.
Other cover types that can help secure the assets and revenue of your company are:
Glass Breakage: Buildings with large, customised windows are quite expensive to replace. If the glass breaks, it can be dangerous to your customers, staff, the interiors, and even your products. Thieves may also see it as an opportunity to do their illegal deeds. Glass Breakage Insurance can protect you in this instance.
Equipment Breakdown: You need funds to repair and replace broken machinery. Equipment Breakdown Insurance assists you financially when it is time to take care of damaged equipment due to mechanical or electrical failure.
Commercial Vehicle: Do you transport employees or equipment from one location to another? These vehicles can get damaged, which interrupts your operations and costs you a lot of money. A Commercial Vehicle Insurance cover can help you during these times.
Fraud: Fraudulent activities can have a significant impact on your revenue. Fraud Insurance protects you against financial damages due to fraud committed by your employees or a third-party entity.
Theft: Theft coverage protects against theft of money, equipment, stock, and others that are too costly to replace. It typically covers both internal and external thefts.
Some events may also lead to halted operations. Although temporary, they can have devastating effects, especially for a small business. That’s why it can be helpful to have Business Interruption Insurance, which is for unforeseen circumstances that may have disrupted your everyday business activities.
Liability
Your business operations can injure a person or damage a property. For this reason, you need to have Liability Insurance, which helps minimise the impact of the negative event. It covers legal costs and required payouts to the injured party if you are found liable.
Some of the most common types of cover include:
Public Liability: All businesses should have Public Liability Insurance. Whether you operate in an office or even at home, it’s vital that you’re covered for potential liabilities claimed by third parties. For example, customers may get injured while your business provides service. If you’re working at a customer’s property and break a window, it’s easy to settle when you are insured.
Professional Indemnity: If your business provides advice or service, Professional Indemnity Insurance is a must. It’s the insurance every professional must have to stay protected against liability for damages. Legal battles are too expensive these days, but you have to defend yourself and your business’ reputation. With Professional Indemnity Insurance, you are protected against claims due to an act, breach of duty, or omission while performing a service.
Products Liability: If you sell products to your customers, you need Product Liability Insurance. It’s beneficial for any small business that makes, supplies, or sells products. Typically, claims arise due to your product causing injury or damage to a person or property. Claims can heavily affect your operations, which can cause disruptions if you don’t handle them quickly.
All three types of Liability Insurance above are essential. Legal battles can go beyond your business and the consumer. Whether the claim stemmed from an injury due to a service, product, or advice, it can cause a ripple effect throughout the company. Therefore, proceedings can become lengthy, complicated, and certainly costly.
Personal and Workers
As mentioned, it is mandatory to have workers’ compensation insurance if you have employees. Aside from this cover, you should also look into getting insured for the following:
Personal Accident: Always consider the potential risks that your enterprise could face if you get into an accident. Personal Accident cover helps your business in case of an injury or even death. It also pays benefits if you lose limbs, sight, and fingers. Permanent paralysis may also be covered.
Illness: Just like an accident, a severe illness can cause you to stop working for a long time and may even be permanent. Protect yourself and your business with an Illness cover.
Life: This insurance provides a lump sum benefit if you die or become terminally ill. Many insurance products offer the option to add Total and Permanent Disablement. TPD pays you a certain amount if you are permanently disabled and therefore can no longer go back to work.
Income Protection: Income loss is a part of being in the business world. But it’s still necessary that you are insured in case you cannot work because you get severely ill or injured.
As with any purchase, you should do your homework before you get specific small business insurance. You have many options, but it does not mean you need them all. Shop around to ensure that you get the right cover for your small business without breaking your bank. Grace Insurance can guide you to find a customised insurance solution for your business. Contact us today to learn how we can help.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
Frans du Plessis, Grace Insurance, ABN 63 133 156 742, AFSL 233750
This article originally appeared on
Grace Insurance Blog
and has been published here with permission.
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