Run a business but have no idea what type insurance you'll need?
A business faces a myriad of risks every time it opens its doors, from fire, theft, damage and loss to being sued for injuries by a member of the public. So having some form of business insurance is important to protect both your assets and yourself from the liability of running a business.
Is insurance compulsory for businesses?
There are usually two types of insurance that are mandatory for most Australian businesses:
- Workers compensation insurance. If you have employees, you are required to have this to protect them in the event of accident or illness.
- Third-party personal injury insurance. If you own and operate motor vehicles as part of your business, you must have this insurance to cover you against personal injury claims that relate to the use of those vehicles.
What type of insurance does my business need?
The right insurance for your business will depend on several factors, including the kind of business you are in, its size and structure, and the industry you belong to. To narrow it down, here are some of the questions you might need to ask yourself as a business owner:
| Key questions | Answer | Cover types you may need: |
|---|---|---|
| Do you make goods that are sold to the public? | Yes | Product liability insurance |
| Do you serve customers in a public place or at your premises? | Yes | Public liability insurance |
| Do you give advice in professional capacity | Yes | Professional indemnity insurance |
| Do you have staff working for you? | Yes | Workers compensation, Employee fraud or dishonesty insurance |
| Do you have any specific things you need protected? | Yes, I have machinery | Machinery breakdown insurance, electronic equipment insurance. |
| Do you do most of you business online? | Yes | Cyber liability insurance |
The answers to questions such as these can give you an indication of where your main exposures are as a business and hence the kinds of business insurance you might need.
What types of business insurance exist in Australia?
There are a number of other kinds of business insurance and, as mentioned, the types of cover you may need will depend on the business you are operating. They include:
- Professional indemnity. Protects you if a client suffers a loss as a result of following your advice or receiving your service.
- Property. Protects you from damage or losses to premises, contents or stock due to insured events or accidental damage.
- Public liability. Covers your liability for third-party death, injury or loss as a result of your negligence.
- Product liability. Covers your liability for damage, injuries or deaths caused by the faultiness or failure of one of your products.
- Theft. Covers you against loss or damage to your contents or stock as a result of theft, burglary or deception.
- Money. Covers the theft of your money from your business premises, during transit and in some cases at your home.
- Commercial vehicle. A choice of third-party property, third-party fire, theft or comprehensive cover.
- Tax audit. Covers the cost of any ATO-prompted investigation or audit into your tax liability.
- Business interruption. Covers losses suffered while you cannot trade because of a loss or damage from an insured interruption.
- Deterioration of stock. Covers deterioration of goods if a freezer machine or a refrigerator breaks down.
- Glass. Covers the cost of replacing broken external or internal glass and items of glass.
- Employee fraud or dishonesty. Covers losses suffered as a result of dishonest actions by your employees.
- Machinery/equipment breakdown. Covers the repair or replacement cost of machinery and equipment that breaks down.
- Goods/property in transit. Covers any losses or damage to your goods during shipment.
- Computer and electronic equipment. Covers damage or losses to computers, electronic equipment or data as the result of an accident.
- Cyber liability insurance. Protects your business from various risks online e.g. fraud, data breaches etc.
What is workers compensation?
If you employ staff to work in your business you are required to provide them with workers compensation insurance. This ensures they will have access to treatment, compensation and rehabilitation if a work-related illness or accident happens.
While health, safety and occupational regulations vary from state to state, workers compensation is compulsory for employers in Australia and extends not just to your full-time employees, but can also apply to contractors who work for you as well.
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