Business insurance

Protecting your business from costly expenses.

Business insurance

Running a small business is a challenge across a range of areas; keeping everything operating smoothly can be incredibly difficult. That’s why taking out a business insurance policy to cover you and your business is a no brainer. This cover not only adds a layer of protection to your finances if something goes wrong on the premises or you otherwise find yourself hit with a hefty bill. It’s always prudent to survey the market thoroughly when taking out your business insurance policy, so find out how to do that and the other ins and outs of business insurance in this comprehensive guide.

What is business insurance and how does it work?

Business insurance is a type of insurance policy catered to the needs of a business. Specifically, this is related to the needs and rights of customers and workers, as well as insuring other vital elements of your business, like equipment. This will, of course, depend on the type of policy that you choose to take out, which will be discussed in further detail below. You’ll find that while some of these are compulsory for business owners to take out, others are optional but can serve as necessary or crucial forms of cover for your business.

What types of business insurance can I choose from?

There are a variety of business insurance types that are available to business owners in Australia looking to take out a policy. Each of these differ from one another in specific ways which make them unique, so you may find you need to take out policies of a combination of these, or indeed all of them. Some of the most prominent of these include:

Public liability insurance

This type of insurance covers businesses against claims made by a member of the public relating to illness, injury, death or loss of or damage to their possession/s. It’s one of the most important to take out if you operate a business which is frequented by customers or other third parties. As well as covering the cost of the claim, public liability insurance will cover your legal costs should a third party covered under your policy pursue court action. This includes both defence costs and damages you’re ordered to pay out. Not having adequate coverage in this area can be incredibly damaging to businesses, particularly smaller ones, as the cost of litigation is almost always significant.

Some businesses are inherently at greater risk of prompting a public liability claim than others. For example, sports centres always have to be prepared for a public liability claim, as injuries are far more likely to take place. This is especially the case for more extreme sports or those that involve climbing or jumping great heights, such as gymnastics or rock-climbing businesses. Contrastingly, the risk of injury or damage caused to a third party at an accountant’s office is comparatively incredibly low, so the owner of this business may not feel that coverage is necessary or that only a smaller amount is needed.

Product liability insurance

Product liability insurance generally goes hand in hand with public liability insurance. This relates to your business’ liability for the product that it produces, meaning that cover extends to death, injury or damage caused to other property or possessions, as well as economic loss due to negligence. In the same way as public liability insurance, product liability insurance also covers legal costs incurred resulting from claims of this nature. However, it’s important to be aware of your insurer’s definition of a product and how that may affect you. These are generally limited to tangible products that are produced by your business, rather than advice.

Workers’ compensation cover

This is one of the compulsory forms of insurance that Australian businesses with employees are required to take out by law. This covers employees working under an oral or written contract, as well as those on full-time, part-time, casual or apprenticeship bases. In essence, this is designed to compensate workers who suffer injury or contract disease whilst on the job at their place of work. Every state and territory in Australia has a government-run scheme to regulate and enforce workers’ compensation. Benefits can vary depending on the state or territory and the nature of the injury or disease, but coverage can include:

  • Expenses relating to hospital stays and other medical needs
  • Rehabilitation for more serious injuries and illnesses
  • Weekly benefit payments in place of wages
  • Single large payment as compensation for lifelong disability or impairment that prevents an employee from working

Commercial vehicle insurance

Similarly, this insurance is compulsory in all states and territories. Ownership and operation of any car in Australia requires the user to take out Comprehensive Third Party (CTP) insurance to cover them for any injury or death caused by an accident for which they’re liable. This specifically pertains to their legal liability and covering any costs incurred by action taken against them in court. This is still the case for commercially operated vehicles, as there’s just as much risk on the road as any other driver, if not more so depending on the type of vehicle. The way that this is paid and whether you get a choice of insurer will depend on where you live in Australia.

In addition to this, you’ll want to take out a further policy to cover costs and liability relating to other aspects of potential motor accidents. The options available to car owners are Third Party Property Damage (TPPD) insurance, which covers the cost of damage to another person’s vehicle or property, Third Party Fire and Theft (TPFT) insurance, which additionally covers damage caused to your car by accidents such as fire or theft, and comprehensive car insurance, which covers these as well as damage caused to your car in an at-fault accident. These insurance policies increase in price with the level of cover, so the right policy for you will depend on the condition, type and use of your vehicle.

Professional indemnity insurance

This covers businesses if legal action is taken against them by a client or customer after suffering a financial or other type of loss due to their advice. This is particularly relevant to financial businesses or those who specialise in providing advice like accountants, estate planners and stockbrokers. While this can be related to advice provided that ends up causing a loss to a third party, this can also be something as simple as a mistake on an important document that creates problems for a customer. This can also extend to damage done to the reputation of a third party such as public relations expenses and defamation cases brought before court due to a business’ advice.

Cyber liability insurance

Something that may be less in your control but remains no less important is damage caused due to cyber-attacks or crashes to your business. Cyber liability insurance can either apply to either your business, its customers or both, the former two being known as first party and third-party insurance respectively. Cyber liability insurance can include data breaches and leaks of information relating to either your business or its customers, system outages that disrupt the flow of finances to your business and legal fees stemming from incidents of this nature. Like professional indemnity insurance, money sought due to damage to reputations of businesses or persons can also be covered under cyber liability insurance. Additionally, if you’re extorted or held to ransom, the payment demanded can be reimbursed by your insurer.

Management liability insurance

Management liability insurance is designed to cover businesses whose manager/s or authority figures are accused of or commit acts against the best interests of their company. This insurance can be split into a few different aspects, including:

  • Corporate liability cover: covers businesses for criminal activities committed by employees or companies, including fraud allegations and Corporations Act (2001)
  • Directors & Officers Liability: specifically pertains to the assets of workers in these positions and covers them if they’re sued. This can cover fraud, confidentiality breaches and misuse of business funds.
  • Employment practices liability: caters to intra-business complaints between employees, such as for discrimination, bullying and sexual harassment allegations.
  • Statutory liability: covers penalties incurred by businesses not complying with government or regulatory rules, as well as Occupational Health and Safety Act (2011)

Commercial property insurance

For businesses that have a primary physical location, this insurance policy can protect you from having to pay out of pocket if damage is caused to your property. This can be for a number of different insured events, such as extreme weather like fire or storms, theft, different types of water damage and others. This can also come in handy if your business deals in physical stock, as property insurance can help cover damage to this and reimburse you for losses to unsellable items. Depending on the policy, you may be able to add accidental damage as an optional extra and insure your business and stock against costly accidents.

How do I compare business insurance policies?

Fortunately, there are many ways you can look to compare a business insurance quote. It’s essential that you compare these policies across as many areas as you can prior to buying, as there’s nothing worse than buying into a policy that doesn’t suit you or finding a better deal after you’ve already signed on with another insurer. These are the areas that you should compare when researching business insurance.

Comparison point Why it’s important
Type of insurance

Each business will be different in terms of their insurance needs, so comparing different types of policies is one of the first key steps to take. Does your business lack any online presence or operation? You may not need to take out cyber liability insurance. If you run a café or restaurant, you’re unlikely to cause damage to reputations or provide poor financial advice, so professional indemnity insurance may not be necessary. Most businesses will require a combination of policies, so the key is to determine the coverage they require to avoid paying for insurance in areas they don’t need.

Type of insurer

It won’t just be the type of insurance, but the type of insurer that you’ll have to factor into your decision-making. You’ll find that there are two major types of insurers on the market offering business insurance policies: larger, premium insurers and smaller, specialist insurers. While premium insurers may be able to offer the most comprehensive service and the widest range of products, specialist insurers, which tend to operate in the online space, will often be able to offer some of the cheapest business insurance for small businesses in Australia on the market and tailor their customer service and insurance policy to your needs. This won’t be the case across the board, though, so it’s best to always compare insurers in these areas too.

Cost of premiums

Even if you’re a big business with booming finances, it’s always important to not find yourself short-changed when it comes to the cost of your insurance. The cost of premiums will be highly dependent upon the policy, or policies, you choose to take up, as well as a variety of personal variables, so you should bear this in mind when contemplating the price. Generally, these policies can add up to set you back several hundred dollars per month in insurance payments if you buy a combination of them. However, you might be able to find an insurer willing to bundle several different types of business insurance for a discount.

Maximum payout

The amount that you’re looking to receive from a claim is certainly a relevant consideration. Different types of business insurance can range between coverage in the tens of thousands up to $10 million. This means that different businesses may have different needs in this respect, as smaller, at-home businesses may not need millions of dollars’ worth of coverage under their business insurance policy. Conversely, if you need a higher maximum payout, you should look for insurers who offer policies which can provide more funds for covered events.

Explained: what dictates the cost of your business insurance

The pros and cons of business insurance

PROS

Provides much-needed cover

Insurance policies can potentially save businesses from financial ruin by covering significant claims and costs that they may incur

Versatile with a variety of options

Business insurance covers a multitude of areas and separate policies can be easily purchased or avoided as per the needs of your business

Covers legal liability

Even if you’re pursued by a third party for financial damages, your business insurance policy will cover your legal liability and costs

CONS

Doesn’t cover all claims

No insurance can provide cover across all facets of business, so your policy is likely to come with a detailed list of exclusions

Some insurance may not be necessary

Depending on the nature of your business, you may not need much in the way of business insurance policies, thus are spending much-needed funds on unnecessary expenses

Can be expensive                  

Your business insurance can end up being a very costly expense, particularly if your business is higher risk and you’re buying multiple policies

Top tips for getting the best small business insurance cover in Australia

Compare the best policies

Comparing is the key to finding the right policy. Savvy is the best place to start when undertaking research into different policies, as we compare Australia’s best business and small business insurance in the most important areas to you. Always compare as many options as you can, such as getting a business insurance quote from each of the best insurers.

Only buy what you need

There may be a temptation to cover yourself in as many areas as you can, but this may not end up being necessary. Determining your core needs from an insurance policy is an excellent way to begin the process of researching policies, as you can immediately rule out potentially expensive options that you simply don’t need.

Familiarise yourself with the Product Disclosure Statement (PDS)

Every insurance product will come with a PDS, which outlines every aspect of the policy from top to bottom. This will explain inclusions, exclusions, payout guidelines and any clauses that may discount you from receiving anything for your claim. Know this document intimately before committing to a policy.

Increase your excess

As mentioned, raising the excess you’ll be liable to pay where possible can be a great help for reducing premiums, particularly for small businesses who may not be able to comfortably afford them otherwise.

Frequently asked questions about business insurance

What’s the best business insurance for me if I’m a tradie?

Aside from the obligatory public liability insurance and workers’ compensation cover, tradies should also look to buy policies relating to general property insurance. This will help insure expensive tools and implements are covered should they be damaged, lost or stolen. Additionally, tradies may wish to take out portable equipment insurance, as these items are likely to be travelling with them to work.

Is business insurance different for small business?

While the best small business insurance in Australia isn’t different in structure to others, you’re likely to find that you’ll be paying less for your premiums due to fewer policy requirements, employees and financial turnover. It’s important to note that this isn’t the case across the board: the cheapest small business insurance in Australia may not be the best for you. Otherwise, all the same types of policy apply to the best small business insurance in Australia.

What business insurance do I need as a sole trader?

As a sole trader, you’re likely to still need at least one of public or product liability insurance or professional indemnity, although these aren’t required in this case. If you operate online, you may want to take out cyber liability insurance. However, policies such as workers’ compensation cover usually aren’t applicable for sole traders.

Is there a business insurance policy that covers the cost of a tax audit?

Yes – tax audit insurance will cover your business for the cost of hiring a professional to help you with your finances should you be audited by the Australian Tax Office (ATO). This is usually either a registered tax agent or accountant.

Will business insurance cover my freezer breaking and costing me all of my stock?

Yes – you’ll probably find that commercial property insurance will cover this sort of incident if your stock is compromised, while other forms of cover like stock deterioration will do the same.

When should I look for a new business insurance policy?

You should always keep an eye out for the best business insurance quote – particularly when it comes time to renew your current deal. Insurers will often increase the cost of their premiums throughout the time that you’re covered by them, so ensure that you’re always looking around and comparing the best policy options for you.

Can I claim for loss of revenue on my business insurance if I become unable to work?

Yes – loss of revenue is covered under most business insurance policies, and having a key part of the business absent, such as an owner or manager, can lead to a drop in revenue.

Should I seek out business insurance from an insurance broker?

Maybe – if you’re not sure about how to decide what’s best for you, a broker can be a solid option for you to take. Brokers will often not charge you for their services, instead receiving a commission stemming from the insurance company that they sign you up with.