Business insurance provides protection against unexpected events such as loss or damage to your property, legal claims and workplace injuries.
Business insurance can be a complex area and it is worth seeking professional advice to help understand and mitigate the risks associated your business. Websites such as Need a Broker can help you get more information about your options.
Factors influencing insurance costs
The cost of insurance varies based on several factors:
- Business activities: What your business does day to day can significantly affect your insurance premiums.
- Business structure: Whether you are a sole trader, partnership, or a company will determine the types of insurance you need.
- Location: Where your business is located and where your customers are can impact costs, especially if your activities are international.
- Financial details: Factors like annual turnover, wages, and owner earnings influence your insurance costs.
- Claim history: Your previous insurance claims history can affect your current insurance premiums.
- Risk management: How you manage business risks can also influence your insurance costs.
Choosing an insurance broker
Insurance cover can be arranged through an insurance company, an agent acting on behalf of an insurance company, or an insurance broker. Insurance brokers are required by law to act as your representatives and work in your interest, whereas insurance agents are acting in the interests of the insurance companies.
All insurance brokers have access to the same insurers who will provide the same price to every broker. Insurance brokers are required to obtain multiple quotes (where possible) and to provide details of the quotes they obtained. It is better to choose your broker first, and then agree with them which insurers they will approach for quotes and why. You will need to do your homework and check with contacts in your industry to establish which broker is the best fit for your business.
Here’s how you can ensure that you select a broker who is well suited to your business needs:
- Understand the broker’s role
- Check their credentials and experience
- Evaluate their insurer relationships
- Assess their approach to risk management
- Seek references and testimonials
- Review the broker's support and claims process
- Discuss their fee structure
Tip
Insurance is a complex area. Make sure you understand all the terms and conditions of the contract before you sign.
Tailoring insurance to your business type
Insurance needs vary greatly depending on the nature of your business.
Workers compensation
Regardless of your business type, workers compensation is compulsory if you employ staff or subcontractors. You can receive significant financial penalties from WorkCover WA if you don’t have the correct insurance for your staff.
If you are sole trader or partnership you cannot insure yourself for workers compensation and should consider a personal accident and sickness insurance policy.
Cyber risks
Cyber crime is a major threat to all businesses. Cyber cover protects your business from events such as malware, email scams and ransomware. Cover will varies between different insurers and not all policies are the same. To obtain cover you will need to have basic cyber security measures in place and should speak to your IT provider about this.
Glass breakage
If you rent premises, your lease will usually require you to obtain insurance for breakage of glass. This cover is provided under a business package policy at a relatively low cost.
Here’s a breakdown of common business types and the specific insurance policies that are most relevant to each:
Consultancy business
- Professional indemnity: Essential for protecting against claims of negligence or breach of duty arising from advice or services provided.
- Public and products liability: Protects against claims of injury or damage caused by your business operations or products.
- Business interruption: Covers loss of income and additional expenses that occur if your business is disrupted by insured events, like fire or storm. Cover can be arranged to compensate for your lost income over 12, 18, or 24 months depending upon your risk profile.
- Motor vehicles: Important if your business activities involve significant travel.
- Cyber risks: Covers losses from cyber incidents such as data breaches or cyber attacks and is crucial in protecting client data.
Hospitality business
- Property insurance: Covers damage to property including equipment and fixtures in your premises.
- Business interruption: Covers income lost and expenses incurred if the business operations are disrupted.
- Public liability: Essential for businesses that interact closely with the public, covering injuries or damages to patrons.
- Liquor liability: Important for establishments serving alcohol, protecting against claims resulting from alcohol related incidents.
Transport business
- Motor vehicles: Comprehensive coverage is crucial for vehicles that are core to business operations.
- Goods in transit: Covers damage or loss of goods while in transit. This is critical for logistics and delivery services.
- Public liability: Protects against third party claims of injury or damage caused by transportation activities.
Independent contractors
- Personal accident and sickness: Covers lost income if you are unable to work due to injury or illness. This coverage is vital for sole traders and partnerships.
- Professional indemnity: Protects against claims of negligence. This is particularly important for contractors providing professional services.
- Public liability: Shields against claims for damages caused by the contractor’s actions at work.
Allied health professionals
- Professional indemnity: Covers claims of malpractice or professional misconduct.
- Public liability: Protects against claims of injury caused to patients.
- Business assets: Covers expensive medical equipment and office furniture against damage or theft.
- Business interruption: Loss of income and/or increase in cost of doing business following an insured event such as a fire or storm.
Businesses working with the NDIS
- Workers compensation: For staff and subcontractors.
- Public liability: Essential for any business interacting directly with clients, particularly in caregiving settings.
- Professional indemnity: Important for protecting against claims of negligence or harm in the provision of care services.
IT industry
- Cyber liability: Protects against a range of cyber incidents, including data breaches and cyber extortion.
- Professional indemnity: Covers liabilities arising from errors, omissions, or failures in software or services provided.
- IT liability: A combination of professional indemnity and public and products liability specifically for this sector.
Jewellers
- Jewellers block insurance: A specialised form of coverage that includes theft, accidental damage, and loss of items from the insured location or in transit.
- Public liability: Covers claims of injury or damage made by customers and other third parties.
Each business type may have unique risks not entirely covered by general policies, highlighting the importance of talking to a knowledgeable insurance broker who can tailor a policy to fit your specific business needs.
Identifying risks
Effective risk management is crucial for any business. It not only protects you from potential losses, it also enhances your business’s value by minimising risks and improving stability.
Understanding how to identify, assess, and manage risks can significantly reduce the likelihood and impact of adverse events on your business. You can implement comprehensive risk management strategies by:
- Defining the context: Understand the full scope of potential risks.
- Identifying risks: Look at internal and external factors that could negatively impact your operations.
- Assessing risks: Use tools like a our risk analysis matrix to evaluate the likelihood and severity of each risk.
- Treating risks: Decide how to mitigate, eliminate, or insure against these risks.
Tip
Home insurance generally doesn’t cover a business operating from home. If you’re thinking of starting a home based business, check your insurance policy and speak to your insurer to find out how this may impact on your cover. An insurance broker can also help you find a policy that provides cover for your home and home based business activities.
Reviewing your insurance
Regularly review your policies to ensure they remain relevant as your business evolves. It is your responsibility to let your insurer know if there are any changes relating to the circumstances or conditions of your business. If you do not disclose changes that have occurred since you originally took out the policy, payouts for any claims may be reduced, or the contract may be cancelled. Notify your insurer immediately of any variations.
If an issues arises, contact your insurer's internal dispute resolution team. For unresolved issues, the Australian Financial Complaints Authority (AFCA) can offer assistance.
Understanding and managing business insurance is crucial for any business owner in Western Australia. With the right coverage, you can protect your business from significant financial losses and ensure long term sustainability.
