A comprehensive guide to both compulsory insurance for small business as well as optional ones for added protection.
Small business insurance policies are designed to protect different aspects of your small business ranging from assets, customers, employees, owners or potentially your earnings. Understanding what risks your business may be exposed to and minimising the exposure to this will help to protect your business.
Compulsory Insurance for Small Business
Australian small businesses must have taken out policies for the following types of insurance:
- Workers’ compensation – this is a compulsory insurance for all small businesses if you have employees to protect against any injuries, illnesses or deaths that occur in the workplace
- Public liability insurance – whilst your own employees are covered, workers’ compensation does not cover for third-party deaths or injuries. This can include customers or members of the public. This is where public liability insurance is best utilised
- Third-party personal injury insurance – ownership of a motor vehicle will require you to pay for third party personal injury insurance as part of your vehicle registration fee
Compulsory or Optional: Industry Insurance
Certain industries will have additional compulsory or optional insurance if your business falls within this industry. Each industry has a fact sheet outlining information pertaining to what is required or recommended. Industry fact sheets can be found here.
Optional: Personal Insurance
These types of insurances are optional, however, are important in considering protecting your earnings:
- Income protection – covers part of your normal income if you’re unable to work due to sickness or injury
- Life insurance – in cases of death or permanent injury, this will cover in the form of a payment
- Disability insurance – covers in the form of payment for becoming permanently disabled before retirement
- Trauma insurance – covers for life-threatening illnesses
- Professional indemnity – covers for any legal action against you because of professional advice. This can be compulsory for certain industries.
Optional: Asset Insurance
Insuring for small business assets remains optional as each business has varying degrees of property, stock or products. Considerations must be made should unexpected and unfortunate events were to impact your business assets:
- Building and contents – covers this in the case of natural disasters, malicious damage, property damage or an accident
- Burglary – important if you have physical products such as a retail store that may be subject to theft
- Machinery – covers for when mechanical and or electrical machinery at the workplace breaks down
Optional: Other Liability Insurance
Besides public liability insurance, it would be wise to consider any other potential liability that your business may be at fault that requires it to be covered. For example:
- Management liability – similar to the purpose of personal insurance, this covers your business assets when a manager or director conducts malpractice
- Product liability – covers for injury, damage or deaths as a result of your business’ product(s)
- Business interruption or loss of income – covers for property damage or assets to cover for ongoing expenses. Minimises threats to profits
- Management liability – covers for illegal or unethical behaviour of management or director that may cause losses to a third party
- Employee dishonesty – covers for theft or fraud from an employee
- Tax audit – covers for costs should you be subjected to an investigation on your business
Optional: Technology Insurance
As businesses become more heavily reliant on technology, this may leave businesses exposed to cybercrime or equipment damage. It’s important to consider cyber liability insurance that may cover you due to breaches with the cybersecurity of data or potential theft/damage.
Business insurance is wide-ranging and certainly is optional for the majority. However, business owners must consider what the ramifications and risks are should you elect not to take out insurance for certain assets of your business. You must ask yourself that in the unlikely event of something catastrophic, would your business be able to withstand the impact and continue to operate? If not, then considerations should be made as to whether it is worth taking out insurance to protect against this.
Additionally, ensure you shop around and compare your options to ensure you are getting the best deal for your business. At Box Advisory Services, we can assist you in finding the right insurance policy. Our expertise in small businesses gives us a unique advantage in witnessing what turmoil certain small businesses find themselves in when they do not have the right coverage in insurance.
Box Advisory Services offers a complete range of business and taxation advice for small-to-medium-sized businesses in Australia. Book an appointment with us now!
Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to contractors and small businesses. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek your own advice for any legal or tax issues raised in your business affairs.