Read on to understand the different types of policies commonly included in business insurance.
But remember that your business may only need a selection of these. However, insurance requirements vary considerably and, if your business is in a specialist industry, you could need others that are not listed. It is vital that you talk with a number of insurance companies or insurance brokers to find the most appropriate insurance for your business.
Compulsory insurance usually has to be taken out separately to business insurance.
All employers must have workers' compensation insurance.
For advice on workers' compensation insurance, contact Work Cover Queensland.
Compulsory third party (CTP)
All motor vehicles must have CTP insurance, which covers personal injury to third parties in an accident. It does not cover damage to your vehicle or any vehicle that you damage.
Common business insurance
- Fire - protects your principal assets including buildings, contents and stock
- Business interruption - depending on your insurer, this can cover risks such as loss of profit, ongoing staff costs and additional operating costs that may be incurred as a result of an event such as fire
- Public liability - covers your potential liabilities to third parties for personal injury or damage to property if you are negligent
- Employees' liability - this includes workers' compensation, which is compulsory for all businesses employing staff
- Burglary - theft from locked premises
- Money - in transit, on business premises and in personal custody
- Fidelity guarantee - fraud or dishonesty committed by employees
- Glass - breakage of fixed external or internal glass
- Products liability - if the use of your product causes harm, loss or damage
- Professional indemnity - for negligent acts, errors and omissions in the provision of professional advice or services
- Electronic breakdown - specialised cover for computers and machinery
- General property - for tools, equipment, mobile phones or stock samples
- Marine and transit - goods being transported by sea, air, road or rail
- Marine and transit (construction risks) - for builders and tradespeople
- Motor vehicle - either business or private, singular or fleets of vehicles
- Directors and officers liability - against alleged breaches of duty
- Employment practices liability - covers damages and costs resulting from, for example, anti-discrimination, unfair dismissal and harassment actions
Other business insurance
Getting the right insurance for your business can be tricky. Make sure you consider all your options. Always ask for the policy in writing and make sure you read and understand the full terms and conditions in the policy disclosure statement. Consult an insurance broker for more advice.
Other compulsory insurance
Some industries require other compulsory insurance. For example, to provide a warranty on home construction, it is a legal requirement that a construction company organises Queensland Building and Construction Commission (QBCC) home warranty insurance for the home owner.
Professional indemnity insurance
Professional indemnity insurance protects you from claims made against you relating to the provision of professional advice or services.
You may need professional indemnity insurance if you provide services involving the use of some special skill or ability - for example, if you provide your clients with advice on:
- design work
- financial planning
- management of their businesses or interests.
If you provide this type of service, you are required by law to meet a particular level or standard expected of your profession. You can be held liable if loss or damage occurs as a consequence of your not meeting that standard.
For example, an architect with professional indemnity insurance would be covered if they were held liable for architectural advice they provided that caused someone injury or loss.
Professional indemnity insurance can cover you, up to the limit of the cover, for:
- your legal defence costs
- the third party's legal costs
- any court awards made against you.
Consider the risk to your business if something was to happen to you personally. You may require some of the following common types of personal insurance as well as business insurance:
- Term life insurance - provides a lump sum benefit should you die or become terminally ill. Total and permanent disablement (TPD) can be added as an option and is paid if you become totally and permanently disabled and are unable to work.
- Trauma protection - provides a benefit if you suffer one of the trauma conditions as offered by the particular insurer.
- Income protection insurance - insures you against the loss of personal income while you are unable to work due to illness or injury.
- Business expenses - insures you for business expenses such as leases and wages while you are unable to work due to illness or injury.
Sections of insurance policies that relate to replacement and asset valuation are often misunderstood.
A replacement policy aims to replace or restore property as new. These policies may have an upper limit on the amount payable and, if you are not aware of this, you could be insured for less than you think. Similarly, if you're not sure of the replacement costs of your assets at today's prices, you may also be underinsured.
Flood cover definitions
The different definitions for flood and inundation in insurance policies often cause confusion.
Most insurance policies do not cover damage to a property if caused by:
- inundation of water flowing from a natural watercourse
- inundation of water from both the storm and overflow of a natural watercourse (unless most of the damage is caused by stormwater)
- other phenomena, such as earth movement, even though this may itself have been caused by water from a storm.
Speak to your insurer to find out if you have the right insurance cover for your business.
© The State of Queensland 2016
The content was first published on www.business.qld.gov.au