If you’re starting or operating a small business you probably already know that business insurance is vital. Small businesses face big risks on a daily basis, and without the right cover an unexpected setback, such as fire, theft, or legal claims, can force even a profitable business to close its doors. However, when the time comes to select your cover it can be hard to know what to look for. Here’s 5 things we recommend you check when securing insurance for your new or existing small business.
Make sure your insurance obligations are met
Your business may be legally or contractually required to take out certain kinds of insurance. The kind of insurance you may need will depend on several factors including your occupation, place of business, number of employees and rental agreement. The most common type of compulsory insurance is workers compensation insurance, which is mandatory for employers.i It’s also compulsory in most states for accountants, architects and migration agents to obtain professional indemnity insurance before registration.ii*
Make sure your most valuable items are included in your policy
When you take out insurance, it’s important to cover your business contents, tools, and equipment. For the most part, you’ll be able to protect these items with material damage and general property insurance. However, there are some valuable items that you’ll need to specify separately within your policy. In many policies, valuable curios, antiques, and works of art will need to be individually specified to be covered for the full amount of their value. On top of this, glass and money will generally need to be protected with their own, specific form of insurance. For general property outside of your business premises, all items above a certain value will usually need to be separately specified for full cover. To learn more about your insurance cover, you should always refer to your PDS.
Make sure you’re covered if your doors can’t open
Most businesses think about covering their assets, but many forget to cover for the financial loss they will experience if their doors can’t open. Loss of income due to closure, as a result of a major event such as a fire or storm, can be covered by business interruption insurance. According to a survey conducted by the Australian insurance council, 15% of eligible Australian SMEs had no business interruption insurance whatsoever.iii Without the proper cover, business closure can severely impact cashflow - and with cashflow being the number one reason why most businesses fail, this is a danger worth thinking about! iv
Cover yourself, not just your business!
If you’re like many business owners, you are your business! If you can’t be on the job, then your profits can be severely impacted. That’s why for many business owners, such as professionals, and sole traders, it’s as important to protect yourself as your business assets. If selected Personal accident and sickness cover will provide, a weekly benefit for certain accidents and sickness, or a specified payout in the event of accidental death or injury.
Make sure you’re not underinsured
Underinsurance affects more businesses than you might think. According to the Australian insurance council survey, only 63% of Australian businesses were adequately insured.iii Businesses in the transport, wholesale, and cultural and recreational industries were most likely to be underinsured, with some businesses having an asset value of more than 12 times their insured amount!
You can avoid underinsurance by making sure you know the true value of the assets you need to protect, and purchasing cover up to that amount. You should also reevaluate your cover on a regular basis whenever you make a business change such as buying extra stock, or new equipment, to make sure you are still adequately insured.
*Allianz Small Business Direct has acceptability criteria for Professional Indemnity under the Allianz Office Pack and may not be able to provide cover for all occupations. Please contact the Allianz Small Business team if you wish to receive a quote for Professional Indemnity.
Allianz Small Business Insurance is issued by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL 234708. We do not provide advice on this insurance based on any consideration of your objectives, financial situation or needs. Policy terms, conditions, limits and exclusions apply. Before making a decision please consider our product disclosure statement. Also view the PDS update (privacy notice).
i Fairwork Australia, Worker’s Compensation, viewed 17 May 2018, https://www.fairwork.gov.au/leave/workers-compensation
ii Business.gov.au, Professional, Scientific & Technical Services fact sheet, viewed 17 May 2018, https://www.business.gov.au/Info/Plan-and-Start/Develop-your-business-plans/Industry-research/Professional-Scientific-and-Technical-Services-Industry-Fact-Sheet#insurance
iii Insurance Council of Australia, Non-insurance in the Small to Medium Sized Enterprise Sector, July 2015, http://www.insurancecouncil.com.au/assets/report/2015%20-%20non-insurance%20in%20the%20small%20to%20medium%20sized%20enterprise%20sector.pdf
iv Jared Hecht, Entrepreneur, The 5 Worst Cash-Flow Mistakes Small-Business Owners Make, Viewed 17 May 2018, https://www.entrepreneur.com/article/249020