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Types of Business Insurance

There are usually three types of insurance that are mandatory for Australian businesses

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Gary Hunter
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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 — but there's a lot to choose from.

To ensure your business gets the protection it needs, we've laid out the different types of business insurance you can take out, what's mandatory, the costs and more.

Is insurance compulsory for businesses?

There are usually three types of insurance:

  • Workers compensation insurance. If you have employees, you are required to have this to protect them in the event of an accident or illness.
  • Third-party personal injury insurance. If you own and operate motor vehicles as part of your business, you must have compulsory third party (CTP) insurance to cover you against personal injury claims that relate to the use of those vehicles.
  • Public liability insurance. This is often also compulsory for certain types of businesses and the self-employed, such as plumbers and electricians in certain states, and covers you for third-party death or injury.

What types of business insurance can I get in Australia?

There are a number of kinds of business insurance available in Australia, all of which protect you for slightly different risks and dangers. Here's a clear breakdown of what they do:

Liability

Liability cover protects you from the numerous legal risks you encounter when you run your own business. Depending on the type of business you run, you can get liability cover with the following types of insurance:

  • Professional indemnity. This protects businesses that provide specialist services or professional advice by covering you for lawsuits and financial losses that result from a client following your advice or receiving your service. For example, if you're a builder and it's found that there are major structural faults with the work you've done, you might get sued. A professional indemnity insurance policy would help cover the legal costs.
  • Public liability. If someone makes a claim against you for any injury or damaged belongings that your business activities cause them, public liability insurance can cover you for the costs involved. For example, if a customer were to slip and fall on your property, this would cover you.
  • Product liability. This protects you for loss or damage claims made against you caused by products your business sold or supplied. It's often included in a public liability policy and covers you for the relevant legal costs.
  • Management liability. This is tailored to directors and managers, and it can cover you for claims made against you for mismanagement, discrimination and other risks associated with managing a company.
  • Cyber liability insurance. If your business relies on technology to operate, cyber insurance can cover you for claims made against you due to cyber attacks. It can cover you for damaged hardware, legal costs, damaged reputation and more.

Assets and income

Another important part of running a business is being able to protect everything that you own and the money you make from it. Some of the policies you can get include the following:

  • Building and contents. Covers damage or loss to the building you operate your business in and its contents.
  • 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. This is generally separate from theft cover.
  • Commercial vehicle. A choice of third-party property, third-party fire, theft or comprehensive cover for your business vehicle.
  • Stock deterioration. 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 glass items.
  • 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.

Business interruption

It's also possible to get cover for interruptions that can impact or prevent you from earning an income. These types of business insurance protections can often be added to a policy and include the following:

  • Business interruption. If a natural disaster like a storm negatively impacts your business operations, business interruption can cover you for losses suffered and ease your financial losses.
  • Tax audit. This covers the cost of any ATO-prompted investigation or audit into your tax liability. It can pay for you to hire an accountant or tax agent.

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? YesProduct liability insurance
Do you serve customers in a public place or at your premises?YesPublic liability insurance
Do you give advice in a professional capacity?YesProfessional indemnity insurance
Do you have staff working for you?YesWorkers compensation, employee fraud or dishonesty insurance
Do you have any specific things you need protected?Yes, I have machineryMachinery breakdown insurance, electronic equipment insurance.
Do you do most of your business online?YesCyber liability insurance

The answers to questions such as these can give you an indication of where your main exposures are as a business and the kinds of business insurance you might need.

How much does a policy cost?

Like most types of insurance, it comes down to your specific circumstances. The amount you pay for cover will depend on what insurance you need, the type of business you run, how many people you employ and where you operate.

To give you an idea though, the tables below outline the average costs for professional indemnity insurance and public liability. The average cost for the former for a self-employed tax agent for example is $49.76 a month while the average small business owner can expect to pay $80.75 per month in public liability insurance.

Professional indemnity insurance

InsurerYearly costMonthly costExcess payable on claims
Berkeley Business Insurance$346.91No options to pay monthly$0 Excess
AIG Business Insurance$527.73$43.54 per month$1,000 Excess
Vero Business Insurance$547.17$45.15 per month$0 Excess
Dual Business Insurance$659.66$54.43 per month$1,000 Excess
QBE Business Insurance$677.71$55.92 per month$1,000 Excess
Average cost$551.84$49.76$600

Data was taken from our quoting engine in February 2018 based on a sole trader tax agent looking for $250,000 in professional indemnity insurance cover.

Public liability insurance

IndustryFoodFoodConstructionConstruction
Employees5101030
Estimated Annual revenue$200,000$400,000$500,000$1,000,000
Insurer 1$60.61$64.56$346.09$670.79
Insurer 2$60.87$69.19n/an/a
Insurer 3$144.41$230.79n/an/a
Average cost (per month)$88.63$121.51$346.09$670.79

Quotes taken from BizCover's Insurance engine in March 2018. Policies come with an excess of $500.

How to apply for a policy

Applying for a business insurance policy can be stressful if you do it yourself. Our Business Insurance Finderâ„¢ makes it easier though. This lets you get personalised quotes, compare policies side by side and tailor coverage to your needs. You'll be asked a few questions to help determine what kind of insurance you want or need and you'll also be asked a few simple questions about your business, including how many employees you have and your estimated annual revenue.

Alternatively, if you don't want to do it yourself, you can get a business insurance quote from a broker by filling out the form below. Brokers can be helpful because they're insurance experts and can make sure you're getting the cover your business needs. They'll also take the time to work out the ins and outs of your business.

Receive a Quote for Business Insurance

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If you are ready to speak with a consultant about different business insurance options available, simply enter your details in the form. Keep reading if you want to learn more about the different types of cover available.
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What is workers compensation?

If you employ staff to work in your business, you are required to provide them with workers compensation insurance in Australia. 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.

FAQs

What won't business insurance cover me for?

All business insurance policies have exclusions. To know exactly what you can't claim for, always read the PDS. In most cases, you probably won't be covered for the following:

  • A company you acquired after taking out business insurance or any assets related to that company
  • Unoccupied buildings or premises
  • War, rebellion or insurrection
  • Government-approved confiscation or destruction of your property
  • Radioactivity
  • Damage to buildings by lightning, earthquakes or impact by road vehicles or falling buildings
  • Aggravated or punitive damages or fines
  • Obsolete equipment that is no longer used by the business

How do I make a business insurance claim?

When you take out a policy, your insurer will give you a number and instructions about how to make a claim. In some cases, it can be done online. For many business insurance policies though, you will often need to call to make a claim. You'll usually need proof of ownership or legal responsibility and as many details as you can provide about your claim, including receipts, photographs and written statements.

What types of business insurance are tax deductible?

According to the ATO, you can claim tax deductions for most "operating expenses" incurred in the running of a business but not for private or domestic expenses. This means that insurance premiums for the following are generally tax deductible for businesses:

  • Workers compensation insurance
  • Professional indemnity insurance
  • Income protection insurance
  • Public liability insurance
  • Motor vehicle insurance
  • Loss of profits insurance
  • Fire and theft cover

Can I get business insurance for a one-off event?

Yes. It's possible to get specialist event insurance that offers public liability cover for one-off events. Most larger brands don't provide cover for single days or events though, but if you already have insurance, you might be able to extend your cover to include single-day events.

Picture: Unsplash

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