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Business Insurance

There are three main types of business insurance that are offered in Australia, liabilities, assets and income. Business owner purchase business insurance to protect their business from problems or hazards that may arise in the course of conducting business. We all understand that running a business is risky, but running a business without the proper business insurance is simply not smart.

What to Insure and For How Much

There are a number of common risks that you can insure against. Depending on how long your business has been in operation will play a role in the type and amount of insurance you purchase.  In the beginning it can be difficult to figure out if you need to insure everything for as much as possible against every possible risk or do you purchase insurance that is going to protect you from the risk that are most likely to your business. You don't want to be under-insured or over-insured as they both carry adverse effects for your business.

Define Under-Insured

If you purchase a policy for a certain amount of coverage and that coverage is less than the value of what you are covering, the insurance company can legally reduce the amount it pays you for any claim you file including small claims.

Legal Requirements

There are some legal requirements in regards to business insurance depending on the type of business you own. If you employ anyone then you are required by law to carry WorkSafe Injury insurance to protect your employee(s). If you are an employee of your own business, you will need the same insurance to cover your self should you be injured at work. It is important to point out that if you are a sole trader or a partnership, then you are not eligible for WorkSafe, so it would be wise to purchase accident and sickness insurance and you probably want to take a look at income protection insurance. While there aren't any legal requirements for this it is highly advisable that you also carry a public liability policy.

Three Main Types of Business Insurance

Professional indemnity insurance is an essential policy that will protect you if your business involves you providing advice to anyone. If advice is your business then you need to know that a client can sue you if they experienced a financial loss due to errors or omissions in the advice you provided. This is coverage that you will want to maintain while you are in business and even after you retire. There are certain professions that this coverage applies to: designers, architects, real estate agents, education workers, consultants and health workers.

Budget insurance is the third type of insurance that your business needs. Budget insurance comes in two forms basically asset insurance and income insurance. Asset insurance is a budget insurance policy that is designed to stand alone and not overlap other policies you may carry. The asset insurance covers your building and its contents, the cash (including the loss of cash that is held on the premise, in transit or at your home), glass, machinery breakdown, computer damage and motor vehicles. The income insurance policy covers several other areas:

  • Loss of profits or revenue - your business has to be surviving after damage. The profits policy will maintain the trading regardless of the loss. You still need to pay employees, and keep your customers happy so that they don't go to the competition.
  • Personal sickness or accident of the business owner
  • Life assurance and superannuation
  • Partnership insurance
  • Key person insurance

There is also public liability insurance. Public liability insurance will help cover you if a third party sues you for personal injury or property damage that they may have sustained while on your property if you are negligent. These liabilities can come from the operation of your business, the products you sell or supplied or from professional negligence.  This type of business insurance is considered essential to every business.

 

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