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Why do you need Business Insurance

Business Insurance

Most small businesses close their doors, never to re-open, following a major disaster such as a fire, or an extended court case or period of business interruption. This is usually due to inadequate insurance.

A strategic insurance program, based on advice from a good insurance broker, can prevent that from happening.  Informed decisions need to be made about what to insure and which risks to accept, manage and minimise.

Basically, business insurance falls into three categories:

• Assets and Revenue - things the business owns and its revenue generating capabilities.
• Liability - legal obligations arising from injury to others or damage to their property.
  
• Personnel - protection against loss arising from personal accident or illness involving yourself or your employees.
  

Below is an alphabetical list and brief explanation of the types of policies most commonly used by small businesses. All businesses are different and their insurance needs vary accordingly. Business insurance packages also vary considerably.

• Business Interruption - provides cover if business is interrupted through damage to property by fire or other insured perils. Cover ensures ongoing expenses are met and anticipated net profit is maintained through a provision of cash flow.
• Burglary - covers the following areas when theft occurs involving violent, forcible entry: loss or damage to stock, goods held in trust and all contents for which you are responsible within the premises. Note: It does not normally cover theft by employees or others entitled to be on the premises.
  
• Employment Practices Liability - a relatively new type of insurance protecting employers against claims and legal costs by employees arising from allegations of inappropriate conduct in connection with their employment. This could include, for example, sexual harassment, wrongful dismissal, or discrimination on the basis of age, race, sex or religion.
  
• Engineering Equipment - some plant must be inspected and certified annually. Usually obtained within an engineering policy, which covers equipment against such risks as breakdown and explosion.
  
• Fire & Perils - covers destruction of, or damage to, your buildings and contents through fire and other perils as lightning, explosion, malicious damage, earthquakes, storm, and water damage. (Note: Flood caused by an overflowing water course, such as a creek or river, is not covered by most standard fire and perils policies.)
  
• Goods in Transit - cover against loss or damage to your property while in transit, either within Australia or on a worldwide basis (depending on your needs).
  
• Keyman Insurance - covers the company in the event of the death or long-term disablement of a “key person”, usually the owner or someone else critical to the continued existence of the business.
  
• Loss of Money - cash and items such as postal orders, cheques and stamps are insured against theft from business premises or while in transit.
  
• Motor Insurance - all company/business vehicles must be insured for third party injury liability. A comprehensive policy will also insure for third party property damage and own damage.
  
• Personal Accident, Illness or Disability - covers against your inability to work and the resulting loss of income. Unless you operate as a Proprietary Limited company, you personally will not be covered by workers’ compensation.
  
• Products Liability - if you sell, supply or deliver goods, even in the form of repair or service, you may need cover against claims of goods causing injury or damage.
  
• Professional Indemnity - businesses which supply advice of any kind can be sued for financial loss due to errors or omissions, and may therefore need this protection.
  
• Public Liability - very important. This covers you against claims by people who may suffer injury or damage to property while on your premises, or while you are working at their premises.
  
• Workers’ Compensation - this cover is compulsory in all states and territories. It covers claims arising from the death, injury or illness of employees arising out of their employment (under workers’ compensation law, or common law) and includes legal costs.
  

In addition to those listed above, there are other risks, which are relevant to the particular nature of a variety of businesses. For example:

• Glass or sign breakage
• Perishable food or other stock deterioration
  
• Computers and computer records
  
• Business machines and equipment
  
• Legal expenses/tax audit
  
• Fidelity guarantee
  
• Product recall
  
•  Credit/bad debts.
  

Please note, the various risks mentioned above do not constitute a definitive list. They are an elementary guide to the type of insurance your business may need.

Some organisations, especially larger businesses or companies carrying on specific types of high-risk work, often require their own specially designed insurance and risk management programs. Brokers provide these services too, designing the policies, negotiating them with insurance companies and then placing the cover with one or more firms.

Risk management programs are often part of the process. Risk prevention and loss prevention strategies often reduce the risks, thereby reducing premium costs.

We suggest you talk to a broker to find out exactly what cover your business requires.

Premium Funding

The premium on a risk product is required as soon as the insurer accepts the risk. However, that often doesn't suit the client business, which may prefer to spread the payments of the premium over 12 months.

Premium funding can be arranged through your insurance broker. This is a credit transaction which is separate from the insurance transaction. Specialist premium funding companies handle the credit arrangements.

This means that if a client wishes to cancel a contract of insurance during the period of insurance, separate arrangements will have to be made with the insurer and the premium funder.

Sourced: NIBA