What insurance policies should I be considering when operating a small business?
Professional Indemnity
Professional Indemnity insurance covers the costs associated with allegations of negligence in services or advice provided in the performance of providing your professional services.
This includes legal defence costs, compensation/damages awarded to claimant, public relation costs
Generally, Professional Indemnity covers you to practice Australia wide and for multiple employers. It is not locked to one location or place of employment.
Professional Indemnity policies are ‘Claims Made’ in nature. This means that you must have a policy in place at the time you are notified of an impending claim against yourself or business, for the policy to respond.
How is the premium calculated?
- Based on your profession and services being provided/advice given
- Fees charged for these services
- Limit of Indemnity selected
- Number of employees
Public & Product Liability
Public Liability insurance is designed to provide protection for you and your business in the event a Third Party Person or Entity (i.e.. customer, supplier or a member of the public) brings a claim against you due to them being injured or sustaining property damage as a result of your negligent business activities. Most public liability policies also extend to Product Liability if you sell, supply or deliver goods as part of your business.
Australia has become a very litigious environment and access to legal advice has never been easier. Therefore, the purpose of Public& Product Liability insurance protects you from the financial burden of claim costs, including the legal defence required and investigation fees.
Sometimes Public Liability insurance is a requirement of a contract arrangement, such as a commercial lease, or when tendering for certain contracts.
How is the premium calculated?
- Based on your business activities and any overseas activities
- The revenue/turnover you generate
- Previous claims
- Steps you have take to ensure the risk of injury & damage is minimised
What is not covered?
- Personal injuries to you or your employees
- Damage to your own property
- Faulty workmanship
- Professional negligence & unlawful activity
- Any event preceding the inception of the policy
CyberLiability Insurance
Cyber Insurance covers a range of first party and third-party costs that you incur following a cyber-attack, unauthorised access or privacy breach. This includes ransomware demands, forensic investigation costs, data restoration costs, privacy and security liability, regulatory fines, and more.
A Typical Cyber policy will cover the below;
1.Third Party Claims: From failure to keep data secure, including claims for compensation, investigations, payment of fines and penalties in addition to defence costs and legal representation expenses
2.Business Interruption: Reimbursement for lost profits, as well as necessary expenses incurred to maintain operation of the business as a result of the interruption.
3.Remediation Costs: Reimbursement of the Insureds own costs including cyber extortion (ransomware), data restoration, forensic, notification and public relations costs, and legal representation expenses.
Property Cover – Building, Contents & Stock
Business Insurance can provide cover for your business’ premises and contents, against loss, damage or theft. Small businesses can opt for a package policy called a ‘business pack’ and personalise the coverage that suits them, including;
- Building
- Contents
- Stock
- Theft
- Money (cash)
- Public Liability (further explained below)
- Business Interruption (further explained below)
How is the premium calculated?
For property damage, insurers require significant amount of information about the building you operate from including construction information, security & fire protection. Following that, the main components of premium are;
- Sums insured
- Chosen excess level
- Previous claims
What is not covered?
- Flood (pending location of your business, based on acceptance)
- Contents/Stock removed from the business premises (see General Property insurance)
*It’s imperative to understand that commercial property policies contain an ‘average clause’ or ‘under-insurance clause’, which means if you insure for less than the full value of the property, contents or stock, a claim can be reduced in proportion to the amount of the under-insurance. Business owners that do not want to insure their full values can opt for a higher excess/deductible.
General Property
This type of policy, which can be included in a ‘Business Pack’ covers items whilst they are away from your usual place of business for both property damage & theft. The most common coverage is for mobile electronics (e.g. Phones & laptops), tools & equipment. You can opt for ‘unspecified’ cover where individual items cannot excess $3k in value, or a ‘specified’ cover where items are individually listed with their sum insured and corresponding serial number.
Worldwide coverage can be provided which is an excellent option for trips domestically & internationally.
How is the premium calculated?
- The total sum insured for ‘unspecified’ cover
- Individual sum insured & serial number for ‘specified’ cover
What is not covered?
- Wear & tear claims
- Intentional claims
- Mechanical faults
Business Interruption (BI)
Businesses and sole traders often prepare for unexpected events insuring their premises contents & stock. But if a significant property loss was to occur, business owners need to consider how quickly can they return to ‘business as usual’ and to what cost.
BI provides protection for your loss of income &payroll expenses if you have suffered a property loss and cannot operate for a period of time, as well as increased costs of reopening. It essentially allows you to focus on rebuilding your business back to where it was, without the financial burden and worry of the ongoing lost income.
How is the premium calculated?
- The chosen coverage of Gross Profit/Gross Revenue/ Loss of Rental Income
- Location of your business operations
- Chosen indemnity period (6, 12, 18, 24 months as required)
- Previous claims
What is not covered?
- BI cover can only be purchased in conjunction with Property cover (building, contents or stock), as a property damage claim must occur first before the BI coverage will kick in
- Undocumented income
- Loss of physical cash
- Losses due to labour strikes or changes in legislation
- Voluntary closures
- Losses due to equipment breakdown
Personal Accident
If you are operating as a sole trader, Workers Compensation insurance is not available to you. In order to protect yourself, Personal Accident Insurance is a way of providing yourself with a source of ‘Income Protection’ in the event of sickness or illness. Policy benefits include a weekly benefit/payment up to a max. of 104 weeks, Lump Sum payments for accidental death or permanent disability and coverage can be extended worldwide.
As pre-existing conditions that cause or relate to an injury or illness will not be insured under new policies, we encourage businessowners to seek coverage early to ensure they are adequately protected.
How is the premium calculated?
- The chosen level of coverage (i.e.. Weekly income& length of benefit period)
- Age, occupation, high risk sporting or activity participation (e.g. Motorcycling)
- Current medical conditions, health status or previous injuries
- Previous claims
What doesn’t this cover?
While all policies are slightly different, as a general rule you can expect the policy to exclude the below;
Illness or injury arising out of;
· Criminal or illegal acts committed by you,
· Under the influence of drugs or alcohol,
· Intentional, deliberate or self-inflicted by you
· Pre-existing conditions
