Business insurance acts as your safety net when things get out of control. Find out which types of insurance for small businesses can give you the utmost protection against potential risks and financial losses.
Types of Small Business Insurance in Australia
There are several types of insurance for Australian small businesses. Picking the right one protects your business, income, employees, and customers. It also ensures that you’re not wasting any money on unsuitable insurances.
So how can you select the right insurance for your small business?
Here are some factors you should consider:
- Mandatory insurance/s in your state or territory
- Financial situation
- Cost of insurance
- Business size
- Common business activities
- Possible vulnerabilities of your business (e.g., cyberthreats, accidents, etc.)
Keep in mind that this list only presents general information to guide you in making a decision. It is still best to consult a licensed insurance broker to get comprehensive information on insurance for small businesses in Australia.
If you already have an insurer or broker in mind, you can verify his or her license here.
Now, let’s explore the different types of small business insurance and determine which ones are crucial to your business.
READ NEXT: 4 Ways to Reduce Overhead Costs for Australian Business Owners
When running a business in Australia, you may be required by the law to apply for the following insurances:
Workers’ compensation insurance
Required for: Businesses with employees
How does it work: It covers any work-related accidents and illnesses. Workers’ compensation insurance typically includes first aid, workers’ compensation, and return to work rehabilitation.
Third-party personal injury insurance (compulsory third-party insurance)
Required for: Businesses that own or operate motor vehicles in their normal operations. This is usually included in the vehicle registration fee.
How does it work: It covers your business against bodily injury and/or property damage claims caused by the official use of company vehicles.
Public liability insurance
Required for: Most businesses, regardless of size or activities.
How does it work: It serves as your protection for any of your negligence that caused bodily injury, death, or property damage to a third-party. It covers bodily injury, property damage, and legal expenses. Take note that you can only file for a claim if the incident happened on your business property. If the incident took place elsewhere, public liability insurance may not provide enough coverage.
These three compulsory insurances — workers’ compensation, third-party personal injury, and public liability — assist your business in shouldering any financial burdens caused by any untoward incidents at work. Take note that the rules in each state/territory under the given insurances are different. Talk to a local insurance broker in your area to know more about this.
Insurances for accident and liability
Insurances under this category cover you from damages or injuries you’ve caused to a third-party.
Product liability insurance
Recommended for: Businesses that manufacture, sell, supply, or deliver consumer goods in trade or commerce.
How does it work: Under the Australian Consumer Law (ACL), consumers can file complaints if they were supplied products with safety defects, especially if the products caused damage, injuries, or death. Getting this insurance can help you cover your liability for any of the said incidents.
Professional indemnity insurance
Recommended for: Businesses or individuals who give professional advice or service to clients. Examples are doctors, lawyers, accountants, financial planners.
How does it work: Professional indemnity insurance protects your business or practice against claims for alleged negligence or breach of contract that resulted in financial loss, injury, or property damage to a third-party.
Insurances for technology and cybercrime risks
Data breaches can cost your business a huge amount of money. Worst, it may even damage your reputation and lose your customers’ trust. Availing insurance with good technology or cyber liability coverage can help you mitigate unforeseeable risks.
Electronic equipment insurance
Recommended for: Businesses that use or deal with computers, electronic equipment, or data.
How does it work: This insurance covers your electronic items against theft, destruction, or damage.
Cyber liability insurance
Recommended for: Businesses with a high risk of cyberthreats
How does it work: It covers financial losses caused by data breaches and other cybercrimes. It can be included in some insurance packages but may also be available as a standalone plan. Of course, it is still best to have strong cybersecurity practices in place to protect your data.
ALSO READ: How to Prepare a Small Business Disaster Recovery Plan
Insurances for loss of income
Insurances under this category are best for small businesses or sole traders who need the guarantee of having a definite fallback in case things don’t turn out well for the business.
Income protection or disability insurance
Recommended for: Sole proprietors
How does it work: It covers part of your normal income in case you can’t work due to a sickness or accident.
Business interruption insurance
Recommended for: Most businesses, regardless of size or activities.
How does it work: Business interruption insurance covers financial losses due to interruptions such as fire or a natural disaster. Its coverage may also include operating expenses, payroll, taxes, loan payments, and the like. It is not sold as a separate policy but is usually included in a comprehensive package policy.
Management liability insurance
Recommended for: Businesses, management committee, company directors
How does it work: It offers protection to your company, directors, manager, officers, or employees against claims made by third parties for alleged misconduct.
Employee dishonesty insurance
Recommended for: Businesses with employees
How does it work: It compensates your business for financial losses caused by employee theft or fraud. You can purchase it alone or as part of other crime insurance plans.
Rather than facing the challenges alone, isn’t it better to have something to turn to when things went wrong for your business? Getting business insurance prepares you for any untoward incidents and mitigates risks.