Insuring your business premises and your business assets is a critical part of establishing a business. For people new to business, insurance can seem like the last thing you want to do in addition to an already long list of expenses. However, if your business is not insured, you may not cover financially from disaster, fire, storm, burglary or vandalism.
Before you start out in business, it is important to talk with Rogerson Kenny Business Accountants, about your specific insurance needs. The size and nature of your business will typically determine the type of coverage you need. As your business grows and diversifies, it is important to keep your insurance relevant, with periodic reviews of your policies to make sure your business is properly covered.
Your insurance premiums will depend on such factors as the location of your business and the goods and services you handle. Rogerson Kenny Business Accountants can recommend an experienced insurance broker who can match your business needs with the range of insurances available.
As well as insuring your business premises and assets, some of these additional insurances could be required depending on your circumstances:
- Public liability to cover clients, customers and visitors.
- Cover for contents, equipment, stock, furnishings and fixtures.
- Professional indemnity insurance if you business is in a service industry.
- Motor vehicle insurance if your business is used for business purposes.
- Personal Injury and or income protection, particularly if work cover is not applicable to your business (click here for more on ‘Work Cover Insurance’ in the Employing Staff section and ongoing employer obligations).
While business insurance varies greatly, below is a guide to the most common types.
PERSONAL INJURY – INCOME PROTECTION INSURANCE
Income Protection Insurance provides a replacement income if you are unable to work at full capacity, or at all, due to sickness or injury. Personal Injury and Income Protection Insurance is often appropriate for sole traders and partners and is a vital link in providing you and your family a regular income stream during times of illness or injury. The maximum amount anyone will pay is 75% of your monthly gross income (i.e. before tax). The benefit periods you can receive for this varies. It could be 2, 5 or until your reach 65 years of age. The longer the period, the higher the premium. There is also a waiting period you can select for when your payments would commence. This could be two weeks, two months, 1 year etc. The shorter the waiting period, the higher the premium.
Other factors that may affect the cost of Income Protection Insurance include the type of work you do; if you are male or female; your age; if you are a smoker; and any pre existing medical conditions will all affect the premium paid.
Life Insurance cover protects those who depend on your income, such as your spouse or children. When considering life insurance, you must ask yourself, how would those left behind cope without my financial support? Some think that simply having life insurance as a part of their superannuation is adequate. However, circumstances change and your cover needs to be enough to provide for that extra mortgage taken out for an investment property or the new business overdraft facility.
Most people have financial commitments no matter what stage of life and there are several types of policies:
- Death cover pays a lump sum to your dependents if you die unexpectedly (cover often ceases once you turn 65).
- Total & Permanent Disablement pays a lump sum if you suffer an illness or injury that permanently prevents you from working.
- Trauma covers pays a lump sum if you suffer any range of specified illness such as a heart attack, stroke or cancer.
KEY PERSON INSURANCE
What would happen to your business if a key member of that team (partner or principal) was permanently disabled or died? The likely scenario may be:
- A profitability decline due to the loss of key sales or production staff.
- Money would need to be outlaid to find a suitable replacement.
- Credit may be affected if the bank becomes aware of the impact on the business.
- Remaining employees may feel their future is insecure.
Insurance arranged on the life of your key employees is owned by the business and would provide a cash injection in the event of death or disablement of the specified employees.
BUSINESS INSURANCE LIFE PLAN
A life insurance plan will provide the cash required to repay a business loan on the death or disablement of a principal. Cash provided by life insurance will discharge the business’ liability, protecting the business’ assets and the estate’s guarantors.
Product liability covers damage or injury caused to another business and / or person by the failure of your product or a product you are selling. You may also be held responsible for products that are either modified by you, form part of another product or are imported by you. Seek advice about this Insurance policy, as you may be able to have your public liability policy endorsed to also cover your product liability.
This protects you from legal action taken as a result of breach of professional duty through negligence, error or omission. This type of insurance is critical for people who provide professional advice.
This covers assets of your business such as buildings, stock, plant & equipment against physical loss, destruction or damage. When arranging insurance, you may cover buildings and plant for their full replacement cost and allow for seasonal increases in stock values.
Covers loss of or damage to stock, plant & equipment and other contents caused by burglars. You typically select the amount of protection required which can allow for seasonal increases in stock value. In addition, the policy automatically provides cover for damage to premises sustained in a burglary, costs of temporary security following a break in, and replacement of locks should keys be stolen.
This enables you to insure against breakage of fixed external and internal glass and other nominated breakable objects such as signs. The policy automatically covers damage to frames, replacing sign writing and ornamentation, damage to stock, and costs of temporary shutting.
This provides protection for money while in transit, on your business premises during and outside normal business hours, while in a locked safe, and while in the private residences of authorised persons. Damage to safes and strong rooms may also be covered as seasonal increases in money held may also be allowed for.
ELECTRICAL MECHANICAL BREAKDOWN
This allows you to insure nominated items of electrical and mechanical plant against sudden and unforeseen physical damage. In addition, refrigerated stock may be covered against deterioration following damage to insured refrigeration equipment.
COMPUTER AND ELECTRONIC EQUIPMENT
This insures nominated computers and electronic equipment against sudden and unforeseen damage. Cover may also be arranged to meet data media restoration costs following loss of information and the increased costs of maintaining a substitute data processing system after an insured equipment breakdown.
SPECIAL RISKS – GENERAL PROPERTY
Covers specified property anywhere in Australia against accidental physical loss, destruction or damage. Valuable plant & equipment items taken away from your business location should be insured under this section.
Covers specified motor vehicles against accidental damage and theft plus your legal liability for damage insured vehicles might cause to the property of others.
GOODS IN TRANSIT
This gives you a choice of insuring nominated property while in transit by land or air against either:
- Accidental damage; or
- The more limited risks of fire, flood, collision, or overturning of the conveying vehicle.
WORK COVER INSURANCE
Click here to view more in the section “Employing staff and ongoing employer obligations”