Whilst some insurance is compulsory for Australian businesses, other types of insurances can vary and provide protection for your business and minimise its exposure to risk.
What are the risks to your business?
This is the first question you need to ask to find the insurance your business in Australia will need.
These risks can be covered by the right insurance.
When you have identified the risks to your business, have a look at each type of insurance and check to see if it will cover your business for each risk. There are many types of insurance for Australian businesses including coverage for property and stock damage, assets, customers, earnings, legal liability and employee-related risks.
Business requires insurance coverage to protect them from losses due to events that may occur during the normal course of business.
The compulsory business insurances in Australia are:
Public liability insurance
In some industries and circumstances, public liability insurance is mandatory before you can legally operate.
Public liability insurance helps protect you and your business against the financial risk of being liable for negligence. Negligence in this case, is causing reasonably foreseeable harm, such as injury or death, property damage, consequential loss or negligent advice.
Public liability insurance is a must for certain industries, have a look if your business industry is listed here.
If you have employees
Workers’ compensation insurance is mandatory if you have employees.
Workers compensation protects employees if they are injured at work or become sick due to their work. The workers compensation insurance payments are paid to injured or sick employees to cover their wages while they are not fit for work, as well as, medical expenses and rehabilitation.
The cost of workers compensation is based on the total wages, salaries and superannuation paid to employees and each industry is weighted in terms of risk (using an industry classification rate).
Each state and territory in Australia have differing workers compensation insurance regulations, so it is important to check your workers compensation regulator in your state or territory.
If your business owns a vehicle
Compulsory Third-Party insurance
If your business owns a motor vehicle, this insurance is mandatory and is included in the vehicle’s registration fee. It provides cover for death and personal injury when the driver of the vehicle is at fault in an accident. In some circumstances, compulsory third-party insurance covers you regardless of who was at fault.
This insurance is also called a ‘green slip’ or shortened to CTP insurance, and must be purchased before paying for a vehicle’s registration with the governing roads and maritime services. There are numerous insurance companies that provide CTP insurance, so it is recommended you shop around for the best price.
Other business insurances
There are many other insurances to cover your business. Depending on the risk level, these policies can include insuring your business, your income and your commercial risk.
Here a number of important insurances your business may want to consider –
Business interruption or loss of profits
This insurance covers you if your business suffers through damage to property by fire or other insured perils. It covers a short-term financial loss from an interruption to a business’s operations as a result of damage to a business’ premises or equipment.
It helps pay your ongoing expenses and maintain profits over the insured period. Business interruption insurance includes loss of gross profit / rent, any additional expenses incurred because of the event (such as renting temporary premises), plus reasonable claim expenses such as your accountants fees, less any savings in expenses.
This insurance is designed to put your business back into the same financial position you were in before the damage or interruption occurred.
Management liability insurance
Management liability insurance protects the personal assets of directors and officers from any liability for mismanaging a company. It covers the business for claims when a manager, employee, director or officers conduct illegal or unethical management practices that cause losses to individuals or businesses.
This insurance will cover any damages and claimant costs awarded against you including any investigation costs, legal expenses, and financial penalties.
Inland Transit insurance provides cover for business goods or personal items while being transported on land, within Australia by road and rail. The insurance is calculated on the type of goods being transported.
For importers, Marine Cargo insurance covers damage to goods that are imported or exported to/from the nation, as well as within the national boundaries, through any means of transport. It is specified and calculated on the annual sales or turnover of the business.
Electronic equipment insurance
Covers your business’ electronic items from loss, theft, destruction or damage as defined under your policy.
The insurance will generally cover the repairs or replacement to return your equipment to its former working state, the restoration of the electronic data as well as, additional costs incurred by your business to prevent a reduction in turnover from this interruption.
In a cyber event, your organisation is solely responsible for the financial costs pertaining to any data breaches or business disruptions due to the event. A business is responsible for regulatory fines, loss of business, damage to a brand or reputation, notifications to customers of a breach, and forensic investigations if required.
Cyber liability insurance covers a range of breaches related to the security of electronic information such as a denial of service attack, a ransomware attack, or even an outage of Internet infrastructure. This insurance offsets the financial risk in the event of a significant data breach or business disruption caused by these incidents.
The aim of cyber liability insurance is to bring the risk of cyber breaches and attacks, down to a level that your business can endure.
Cyber liability insurance is highly recommended if your business collects, processes or store employees’ or customers’ personal or financial data, or if you have proprietary intellectual property.
What you are looking for in business insurance?
There are hundreds of insurers and insurance policies in the marketplace. It is important that you do your homework, as policies can vary greatly, not only in terms of cost but also in what they cover and more importantly, what they don’t cover.
Each business has its own unique set of circumstances and risks. We recommend you ensure these are covered in your insurance policies.
Here are a few things you should consider when purchasing an insurance policy –
Does the policy identify and mitigate the risks to my business?
The full scope of your business risks and exposures should be identified and assessed to ensure the insurance policy will help manage, predict, and reduce these risks.
Is the policy tailored to my industry?
There are plenty of standard insurance policies available, however, in some circumstances, it may be relevant and more appropriate to search for industry specific insurance policies which may better meet your needs and your risk exposures.
For example, does the insurance policy cover your business actions especially in the case of dangerous activities or handling of dangerous goods such as asbestos.
Is your business under insured?
You may need to identify any gaps between your insurance policies and their coverage.
The team at Abdera business services can help your business identify and assess the full range of risks and exposures or if your business has any gaps in insurance coverage. We are not insurance brokers and offer independent and personal advice. Call us on +61 2 8916 6259 or contact us here to get started.
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