Written by Business insurance is coverage that protects companies from financial losses caused by unexpected events or liabilities. It helps minimise the impact of risks and ensures the stability of operations. It includes different types of coverage, such as general liability insurance, property insurance, professional indemnity insurance, and workers' compensation insurance. Each type addresses specific risks and responsibilities related to different aspects of the company operations.
By getting the right insurance, businesses can safeguard their assets, employees, and reputation, giving them peace of mind and financial security. With insurance in place, companies can focus on their main activities, knowing they are protected from unexpected events that could disrupt operations or cause significant financial strain.
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Why is business insurance important?
Insurance is crucial for protecting your company's assets and managing risks. Here's a few reasons why it matters for all :
- asset protection: Business insurance safeguards your company's assets, including physical property, equipment, inventory, and intellectual property. It provides coverage against events like fires, thefts, or natural disasters.
- liability coverage: Accidents happen, and if your business is held responsible for causing property damage or bodily injury to a third party, liability insurance covers the costs of legal proceedings, settlements, and damages.
- business continuity: In the face of unforeseen events or disasters, business interruption insurance helps cover ongoing expenses and lost income. This support allows your company to recover and continue its operations smoothly.
- legal compliance: Certain types of business insurance may be legally required, depending on your industry and location. Obtaining the appropriate coverage ensures compliance with regulations and protects your business from potential penalties.
- peace of mind: Knowing that your business is adequately protected by insurance brings peace of mind. It allows you to focus on daily operations, growth, and achieving your financial goals without constant worry about unexpected financial setbacks.
Understanding the importance of business insurance empowers you to make informed decisions to safeguard your company's future.
How do I compare business insurance policies?
In the insurance world, there are many aspects to compare to ensure you get the right balance and the best deal. Some of the factors to consider when comparing your options include:
Type of insurance
The majority of businesses will require a mix of insurance types. It’s vital to ensure you’re covered in areas that are important to your specific type of business, and that you don’t pay for types of insurance that are unnecessary. In some cases, smaller specialist insurers can offer a more tailored solution so you don’t end up paying for insurance you don’t need.
Who is offering the insurance?
There are large general insurers, some of which are household names, and smaller specialist insurers, who tend to specialise in particular industries or niche areas. These smaller insurers tend to operate mostly online but can often provide the same or better insurance compared to big brand names which have substantial advertising overheads.
Cost of premiums
Naturally, we all want to find the best deal available, but the cheapest form of insurance isn’t necessarily the best for your company. Sometimes purchasing individual forms of insurance can be a more expensive option than a business package, which has several types of insurance bundled into one. The overall business package may cost you slightly more, but it may be cheaper than having multiple smaller insurance policies.
Maximum payouts
The level of insurance you take out must be proportionate to the size of your business and the risks involved in running it. For example, a café owner may feel that $10 million public liability insurance is sufficient coverage, but the organiser of a large music festival may be looking for coverage ten times this amount. Ensure the maximum payouts are in proportion to the level of cover you require.
Suitability of cover
Each business has different insurance requirements, and what’s important to one enterprise may not be vital to the next. For example, if you run a manufacturing company with a robotic production line, having machinery breakdown insurance may be vital to ensure the long-term viability of your company. However, a hairdresser or clothes retailer may not consider this important at all. Make sure the insurance you choose is suitable to your industry or profession, and don’t pay for insurance you don’t need.
The types of business insurance
More of your questions about business insurance
As a sole trader, you may still need some forms of small business insurance such as public or product liability or professional indemnity. If you operate online, you may want to take out cyber liability insurance. However, other business insurance products won’t apply to a sole trader or small business, so it’s important to assess your situation to determine which policies are and aren’t required.
Public liability insurance isn’t compulsory in every situation, although the rules do vary between states and territories. However, many government contracts state you have to have a minimum level of public liability insurance (often $5 to $10 million) to be eligible to submit a quotation to carry out work for the government.
Apart from the obligatory workers’ compensation coverage, tradies should also look to get business equipment insurance. This will help cover expensive tools should they be damaged, lost or stolen. Additionally, many tradies and handymen also take out portable equipment insurance, as this will cover such items as generators and laptops which are likely to be travelling with them to work.
Yes – according to the Australian Taxation Office (ATO), the premiums you pay for company insurance can be written off as an operational expense on your tax return.
Probably annually, if not more often. Regularly comparing business insurance is a great way to ensure you have the right coverage and are getting a good deal. Business insurance coverage must be renewed every year, so getting your renewal letter is a good time to shop around.
You can typically make either annual or monthly payments using a credit or debit business card, or by direct debit from your bank account. There may be a small monthly administrative fee if you choose to pay on a monthly basis, however.
Product liability insurance protects businesses from claims arising from damages or injuries caused by their products. It provides coverage for legal defense costs, settlements, or judgments if a product you manufacture, distribute, or sell causes harm to a consumer.
Whether product liability insurance is necessary depends on the nature of your business and the products you offer. If your business involves manufacturing, distributing, or selling products, it is highly recommended to consider product liability insurance to protect against potential product-related risks and associated legal expenses.
Yes, you probably will, as the majority of business insurance policies do not cover company-owned or commercial vehicles. However, vehicles used for business purposes may be covered by auto insurance and there are specialised insurance companies which provide commercial vehicle coverage for fleets and industrial vehicles.
Yes, business insurance can provide coverage if you, as the owner, are unable to work due to injury or illness. One type of insurance that can help in this situation is called ‘business expense insurance.' It is designed to cover essential business expenses, such as rent, utilities, salaries, and loan payments, while you are unable to work. This coverage can provide financial support and help ensure that your business can continue to operate smoothly in your absence.
Yes, you can typically modify your business insurance policy as your business grows and evolves. It is important to keep your insurance provider informed about any changes in your operations, such as expansion, new products or services, or an increase in the number of employees.
This allows them to assess the changes in risk exposure and recommend appropriate adjustments to your coverage. Regularly reviewing and updating your business insurance policy ensures that you maintain adequate protection as your business expands and adapts to new challenges and opportunities.
Operating without business insurance can expose your business to significant risks and financial vulnerabilities. Without insurance, you may be personally liable for legal claims, damages, or losses incurred by your business.
Lawsuits, property damage or unexpected events can lead to substantial financial burdens that may jeopardise the survival of your business. It is crucial to have appropriate insurance coverage to mitigate these risks and protect your business assets, reputation and financial stability.
Business insurance policies often include coverage for employee injuries or illnesses through workers' compensation insurance. Workers' compensation provides benefits to employees who suffer work-related injuries or illnesses, including medical expenses, rehabilitation costs, and lost wages.
It is a legal requirement in many states and territories to carry workers' compensation insurance if you have employees. By having this coverage, you can protect your employees and your business from potential liability and financial consequences associated with workplace injuries or illnesses.
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Disclaimer:
Savvy is partnered with BizCover Pty Ltd (ABN 68 127 707 975, AFSL 501769) to provide readers with a variety of business insurance policies to compare. Savvy earns a commission from BizCover each time a customer buys a business insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via BizCover.
Savvy does not compare all business insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.
For any further information on the variety of insurers compared by BizCover or how their business works, you can read their Financial Services Guide.
