Business Insurance – The What, Why, Where and How Much!

I am going to start a business!

So, you’re ready to become your own boss. You’re eager to stop working for others and are passionate about offering a service or product because you believe you can do it better yourself. I was in the exact same position four years ago when I decided to take the plunge and start a business from scratch. After 20 years as both an employee and part business owner in the insurance industry, I was finally ready to build something for my family. I had the experience, now I just needed customers!

There’s a lot to get organised before you get started: setting up a company and trading name, obtaining an ABN number, hiring employees, setting business goals, budgeting, securing retail or office space, creating a website, and planning your marketing strategy. Once you’ve signed a lease for your retail space, you’ll also need to consider business insurance, which might be new to you.

What type of insurance does my business need?

There are numerous types of business insurance policies and insurance policy sections – that most people would not be aware of. Public and Product Liability Insurance is absolutely essential. If you sell, repair, service, or deliver goods, you’re responsible for any damage or injury caused by those goods. Public Liability Insurance covers you for third-party bodily injury, death, or property damage resulting from your negligence. Product Liability Insurance protects you if someone is injured or suffers damage due to a product you’ve sold. An example of this – you are a Café owner and you have prepared a meal for a patron who gets sick from consuming it. They present you with medical bills as a result of hospital admission.

Additionally, your retail lease might require Plate Glass Insurance for the shopfront glass, protecting it against damage from vandalism, storms, or vehicle impacts.

If you’ve borrowed money to finance the shop fit-out, you’ll need Fire and/or Flood insurance to cover potential damage to your equipment from these events. The lender or bank will want to ensure that you have protected the equipment they have financed, as they will have an interest in making sure they get their money if anything catastrophic was to occur.

Business Interruption insurance is also crucial. It helps cover ongoing expenses like rent, wages, and utilities if your business is temporarily unable to operate due to a loss, such as a fire. An example of this was the 2011 floods where many businesses in the South Bank area of Brisbane were impacted by loss of power due to the floods. Many business owners were unable to trade for an extended period of time, therefore lost income and/or had to close shop.

Other policy sections to consider include Money if you handle cash, Theft for attempted break-ins, and Machinery Breakdown if you rely on equipment with motor components, like kitchen appliances such as fridges, freezers and cold rooms.

If you provide professional advice, such as financial planning, you’ll need Professional Indemnity Insurance. If you retain sensitive customer data, like a mortgage broker, Cyber Liability Insurance is essential in the event that your systems are compromised, and that client data is released.

What will business insurance cost me?

The cost of insurance varies based on factors such as your occupation, the services or products you provide, your annual turnover, the shop front location, and the value of your contents and/or stock. High-risk businesses, like restaurants that serve alcohol and use deep fryers, will have different needs and pricing compared to lower-risk businesses, like mortgage brokers who can work from home. Starting a business means cash flow initially is tight, so having the ability to pay for business insurance monthly, may be the best options for you.

So where do I source business insurance?

You have two main options when it comes to purchasing business insurance:

1) Research and compare policies yourself online and hope that you can understand the jargon and policy conditions/exclusions. This is a very time-consuming exercise, and do you really understand what you are buying? Direct insurers do not provide advice, so its really up to you to understand what it is you need specific for your business. If you need to lodge a claim, its up to you to lodge and manage yourself.

2) Use an expert like an insurance advisor. An insurance advisor understands that insurance is only important when you need it. They know that reading the fine print is the last thing business owners want to do. They’ll save you time, worry, and money by finding the best insurance policy for your needs, comparing options, reading the finer details, and managing your claims. They work for the customer and not the insurer, so it is in their best interest to get the best result for the customer, when it comes to claims. Plus, as a bonus, they remarket the policy each year to ensure you are getting the best deal.

Is business insurance tax deductible?

Yes, as a business owner, the cost of your business insurance would be considered a tax-deductible expense. Making sure you present this cost to your accountant, is the best scenario to ensure you are getting the maximum amount back.

Hopefully this gives you an understanding of the complexities when it comes to business insurance, and that you have experts in this field willing and able to assist you!