Key types of insurance for your business

Insurance protects our businesses against the risk of an unexpected event happening. Yet it’s not always easy to know the type and amount of insurance that we need. In this article I’ve highlighted six key types of insurance to consider for your business.

The first two types are legally required, the other four types may well be worth considering for your business.

Insurance that may be legally required for your business:

1.      Workers’ compensation insurance

Workers’ compensation insurance provides financial support if a person is injured at work or becomes sick due to their work.

There is a legal requirement to have this insurance if you have an employee or labour only contractor. Each State of Australia has a different system for how to purchase this insurance, you’ll either go via the government or to an insurance broker. The rates are defined by legislation.

 Go to AIHW for more information on this type of insurance.

2.      Industry specific insurance

There are certain industries that have a legal requirement for a particular kind of insurance, e.g. builders warranty.

As a business owner you need to speak to the governing body for your industry to ensure you’re aware of any industry specific insurance that is required.

Other types of insurance to consider for your business:

3.      Professional indemnity insurance

Professional indemnity insurance covers the risk of making a professional mistake, e.g. an error or omission.

This type of insurance is usually for advice-based business, e.g. an accountant. There are circumstances where a service-based business, e.g. a plumber, could also need this type of insurance if they’re also providing design advice as part of their work.

Certain professional bodies also require this type of insurance to be in place.

Contact your insurance advisor and any relevant professional body to discuss if you need this kind of insurance.

4. Public liability insurance

Public liability insurance, sometimes called general liability insurance, covers the risk of a member of the public, or their property, being harmed when there is an unforeseen incident.

If your business has visitors to your office (clients or otherwise) or your staff work on client sites then this kind of insurance can be useful. The world of work is changing with meetings taking place in public areas, like cafes, so it is worth considering your risk in those circumstances.

Be sure to talk to your insurance advisor about the different situations where your business comes into contact with members of the public, or their property.

5. Business insurance

Business insurance can cover a broad range of areas including property and assets, electronic equipment, data breach, employee dishonesty and business interruption, e.g. where a key person in your business has to have an unexpected operation.

An insurance advisor will be able to guide you on the specific types of business insurance that will be relevant for your particular business.

6. Income protection insurance

Income protection insurance covers the risk of a policy holder not being able to work due to illness or accident.

The aim of this kind of cover is to meet your ongoing financial commitments, e.g. mortgage payments, until you’re able to return to work.

Insurance won’t solve the underlying problem, e.g. your home being burgled, but it does give you protection against the risk itself.

Payouts from insurance policies don’t tend to cover you or your business for 100% of the costs. They will ease the stress of dealing with the particular situation that has occurred.

Together with the appropriate insurance, I recommend that my clients build up a cashflow buffer in their business, and in their personal life, to smooth over events that can happen and any shortfall in insurance payouts.  The amount you put aside will depend on your personal circumstances but I recommend 6 months' worth of your business or personal expenses as a guide line.

If you want to discuss the financial risks in your business, and what you might consider putting in place to prepare for them, book a 20-minute call with me to discuss how I can provide that support for you.  Book your call HERE.

DISCLAIMER

All visitors who use this site and blog and rely on any information do so at their own risk.  This blog is for general information purposes only.