Business insurance protects small, medium and large businesses from financial losses arising from a range of different incidents, from accidents causing property damage or hurting a customer to legal costs and a wide range of other risks.
Whether you're a sole trader working from home or a company with staff and premises, the right cover can be the difference between absorbing an unexpected loss and having to stump up for it yourself.
Types of business insurance
There’s a vast range of business insurance types that you’ll need to consider when choosing the right policy or package for your needs. Here’s a breakdown of the most common policies available in Australia and the coverage they offer:
What does business insurance not cover?
Exclusions vary between policies and insurers, but the following are commonly excluded across most business insurance products:
- Pre-existing known claims or incidents the insured was aware of before taking out the policy
- Intentional or criminal acts by the insured
- General wear and tear, gradual deterioration or lack of maintenance
- Events that occur while the policy is lapsed or outside the policy period
- Losses not directly caused by an insured event
Always read the Product Disclosure Statement (PDS) before purchasing. Exclusions vary significantly between insurers and policy types.
How much is business insurance?
Business insurance varies widely in cost based on a wide range of factors. According to BizCover, the average public liability insurance policy taken out through them came with a monthly premium of $39, while the average professional indemnity insurance policy cost $102 per month.
However, in the current market, it’s becoming more difficult for small businesses to afford coverage. The Insurance Council of Australia (ICA) called for “urgent reforms to outdated state and territory laws”, against the backdrop of public liability insurance rising by up to 60% since 2019.
The following table shows how much different types of cover cost on average for a range of different businesses:
While these may provide some guidance, premiums are different for every business. Some of the key factors that affect your premium include:
- Industry and risk profile: businesses with greater hazards and higher foot traffic, such as trades and construction, typically pay more for public liability cover than office-based professional services.
- Business size: revenue, number of employees and physical footprint all influence the amount you pay for insurance. The bigger your business, the more you’re likely to pay.
- Type of cover: the mix of insurance products you choose to buy will obviously have an impact. Packaging multiple together will cost more than if you only bought one or two (though you may get a discount on business insurance packages).
- Level of cover: a higher sum insured will drive up your premium. That’s because an insurer stands to lose more if you make a claim.
- Claims history: a history of claims typically increases renewal premiums, as you’re seen as a greater risk of making claims in the future.
- Location: some postcodes attract higher risk ratings due to their vulnerability to risks like fire, flooding or theft.
What insurance do I need for my business?
The right cover depends on how your business operates. Here are some scenarios where a certain type of insurance may be suitable or necessary:
- Do you have employees? If so, workers’ compensation insurance is mandatory regardless of where you’re operating.
- Is your business customer-facing? Having a physical business premises where people meet you or meeting them at their homes will likely call for public liability insurance.
- Do you provide professional advice? Professionals like financial advisors, lawyers, doctors and accountants should all have professional indemnity insurance (and may be required to through their industry body).
- Do you manufacture or sell goods? Product liability insurance is a must, as you could be on the hook if someone falls ill from one of your pies or ruins their laptop due to your leaky bottle.
- Do you own your business premises? Commercial property insurance will bring greater peace of mind. It may be a requirement if you’re still paying off your loan. This works the same way as home insurance for residential property.
- Do you keep inventory on-site? Taking out a business contents insurance policy will help protect against damage to your stock, especially if it’s valuable.
- Does your business rely on online services? Housing private customer data that could cause major problems if leaked points to cyber liability insurance being a must.
- Does your business have directors? Management liability insurance can protect both them and your business if there are serious claims made against them by current or former employees.
Is any business insurance compulsory in Australia?
Yes, workers compensation is compulsory for all businesses with employees in every Australian state and territory. This is a non-negotiable for anyone employing at least one worker, regardless of the industry.
On top of that, public liability insurance is compulsory for certain industries and may be required as a condition of a trade licence, council permit or commercial lease. For example, electricians need at least $5 million in public liability cover to operate in Queensland.
The same applies to professional indemnity insurance, which is a condition of registration for a range of professional industry bodies, such as health practitioners under Ahpra and accountants under CPA Australia.
You’ll need to check with your industry body, or a professional business adviser or insurance broker, if you’re unsure which policies are required. The Federal Government’s adviser finder helps you locate professionals and organisations close to you.
How much should I insure my business for?
The actual dollar figure you should insure your business for will come down to factors specific to you and the risks you face. Some of the things you’ll need to consider are:
- Your business’ size: larger businesses with more employees and customers are often exposed to greater risks.
- The type of insurance you need: not all types of cover allow you to insure yourself for the same sum. For instance, while public liability insurance is generally available for $5 million, $10 million or $20 million, cyber liability insurance may range from as little as $100,000 to $5 million.
- The nature of your business: think about the likelihood of having significant claims made against you. A small online crochet business is much less likely to have any such action taken against it compared to a legal or accounting firm.
- The value of the business’ assets and stock: if your business owns its property and/or valuable equipment, you may need a higher level of cover to insure them adequately. The same applies to the stock you buy or keep on premises.
- Industry insurance requirements: as mentioned above, certain industries and industry organisations may require you to take out a minimum level of cover for public liability or professional indemnity insurance.
How to take out business insurance through Savvy
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Fill out the quick online quote form
Share details about your business’ industry, size, revenue and more.
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Compare quotes from insurers
You’ll be able to see quotes from our partner’s panel of business insurers side by side.
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Choose your policy and buy it
If you see one you like, you can go ahead and buy it. It really is that simple.
Top tips for buying business insurance policies
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Know what you're legally required to hold
Before comparing optional covers, make sure you have your compulsory insurances in place. Workers compensation isn’t optional and operating without it carries legal penalties, with the same applying to PL or PI cover in certain cases.
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Don't compare on price alone
The cheapest policy isn't always the best one. Check what each policy excludes as well as what it covers, as two policies at similar price points can differ significantly in the claims they will and won't pay out on.
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Make sure your cover limit is adequate
Set your cover limit based on your worst-case scenario, not your most likely claim. A limit that feels sufficient for a minor incident may leave you significantly underinsured if a major claim arises.
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Review your policy at least annually
Your business insurance needs can change quickly. If your revenue, headcount, premises or activities have changed since you last reviewed your cover, your existing policy may no longer reflect your actual risk exposure.
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Read the PDS before you buy
The PDS contains the full terms of your policy, including what's covered, what's excluded and how to make a claim. Paying particular attention to the exclusions section before purchasing can help you avoid unwelcome surprises down the track.
