Before choosing an insurance policy you'll need to evaluate your business's insurance needs. Your insurance requirements may vary considerably depending on the type of business you operate.
Some insurers offer insurance package policies specially tailored to cover your business needs. There are also individual products that may be relevant to the particular nature of your business.
Industry associations sometimes buy insurance in bulk to provide better deals to their members. They also provide important insurance advice that is specific to the industry. If you are a member of an industry association, contact them to find out how they can help you.
There are three broad types of business insurance:
1. Asset and revenue insurance
To protect your assets and income, you should consider insurance for your motor vehicles.
Motor vehicle insurance
It is compulsory to insure all motor vehicles and fleets that your business uses on public roads. Many different types of policies are available, so it’s good to make sure you understand each before making a decision.
There are four basic options:
Compulsory third party (injury)
Compulsory third party covers you for claims made against you for medical and compensation costs arising from the use of your car. You must obtain this insurance to register your car.
Third party property damage
Third party property insurance covers your liability for damage to another person or to the property of others and your legal costs. It doesn't include repairs to your own car if you caused an accident.
Third party, fire and theft insurance
Third party fire and theft insurance covers you against the events covered above, as well as fire and theft. It also insures against damage caused if your car was stolen.
Comprehensive insurance covers you for all of the above plus damage caused to your own car by you in an accident. If you're buying a car on an instalment basis, financiers will usually insist on this cover.
The following types of insurance aren't compulsory, though it is recommended that you consider all options:
Building and contents
Covers the building, contents and stock of your business against fire and other perils such as earthquake, lightning, storms, floods, impact, malicious damage and explosion.
Insures your business assets against burglary, and can be important for a retailer or business that has a property that is not always attended.
Business interruption or loss of profits
Covers you if your business is interrupted through damage to property by fire or other insured perils. It can help ensure your ongoing expenses are met and profit is maintained through a provision of cash flow.
Deterioration of stock
Covers your business for the deterioration of chilled, refrigerated or frozen stock following the breakdown of the refrigerator or freezer they were kept in.
Covers your electronic equipment for theft, destruction or damage.
Covers losses resulting from employee theft or fraud.
Insurance for farms covering things such as crops, livestock, buildings, and machinery.
Goods in transit
Covers loss of, or damage to, the goods you buy, sell or use in your business when they are in transit by ship, air, post, rail or road.
Protects your business when mechanical and electrical plant and machinery at the worksite break down.
Covers you for the cost of fees in the event of a tax audit or investigation into your business.
Property in transit
Covers theft or damage of items you use for business purposes that travel with you, such as tools and equipment.
2. Personal and workers insurance
Insuring yourself and your employees in the event of a workplace accident or illness is essential for protecting your business.
Consider the following workplace insurance obligations:
Injury, illness or death in the workplace can cause severe hardship to your workers, their families, and your business. For this reason it's important that you have adequate protection.
As an employer, it's your responsibility to maintain current workers' compensation insurance to protect against financial hardship as a result of a workplace accident.
In most cases, you must provide accident and sickness insurance for your employees - workers compensation - through an approved insurer. Workers compensation is covered by separate state and territory legislation.
Independent contractors may require their own insurance. See our Independent contractors topic for more information.
Public liability insurance protects you and your business against the financial risk of being found liable to a third party for death or injury, loss or damage of property. It also covers 'pure economic' loss resulting from your negligence or that of your employees. Regardless of business size, it's important that you consider insuring your business for public liability.
Personal accident and illness
If you are self-employed you won't be covered by workers compensation, so it's recommended that you cover yourself for accident and sickness insurance through a private insurer. This policy will compensate you for loss of revenue while you or your employee(s) recover.
As a business owner, you may also wish to consider personal life insurance. There are several types of life insurance available. Some are investment-type funds where you contribute over a certain time and get back your investment plus interest earnings at the maturity date. Others are designed to cover things that could happen to you, such as:
- Income protection or disability insurance
covers part of your normal income if you are prevented from working through sickness or accident.
- Trauma insurance
provides a lump sum when you are diagnosed with one of several specified life threatening illnesses.
- Life insurance
provides a lump sum or series of payments for you, your partner, or your dependents if you die or in some cases, if you are permanently injured.
- Total and permanent disability insurance
provides a lump sum only if you are totally and permanently disabled before retirement.
The Financial Ombudsman Service (FOS) considers complaints from policy owners of Australian life insurance companies. The service also assists with superannuation inquiries or complaints if your super fund is administered by a life insurance company. You can phone FOS on 1300 780 808.
3. Liability insurance
If you own a business, you may be liable for damages or injuries to another person or property. Though liability insurance is optional in most cases, it is strongly recommended for businesses in all industries as the likelihood of being sued is unpredictable and potentially very costly.
There are several types of liability insurance to consider:
Public liability insurance protects you and your business against the financial risk of being found liable for negligence. Negligence is causing reasonably foreseeable harm, including:
- injury or death, such as due to a slug in ginger beer making a customer sick
- negligent advice, such as saying a company or employee is performing well when they’re not
- nervous shock, such as emotional distress or a recognised psychiatric illnesses
- property damage, such as negligently causing a fire
- pure economic loss, which occurs in very rare cases where there’s a special duty of care and a negligent act or omission causes a business to lose expected revenue.
Professional indemnity insurance is a variety of insurance products that help professional cover the cost of litigation. Depending on the product, this may include liability due to:
Breaches of contract, such as:
- not achieving the results of a contract
- not building a boat on time
- providing negligent advice, such as:
- bad financial advice
- giving wrong nutritional advice
Mistakes providing a service, such as:
- not auditing a company’s accounts properly
- performing a surgical procedure wrongly.
Sometimes, professional associations offer industry-specific professional indemnity insurance.
If you sell, supply or deliver goods, even in the form of repair or service, you may be liable if your products cause:
- injury or death
- property damage
- nervous shock, such as emotional distress or a recognised psychiatric illness.
Product liability insurance covers you if any of these events happen to another business or person by the failure of your product or the product you are selling.
© Commonwealth of Australia 2016.
The article was first published on business.gov.au