Don't take risks with your business...Insure your number one asset

It takes courage to go into business on your own. You must be prepared to take risks, but that doesn’t mean you have to take unnecessary chances. Intelligent small business insurance is as important in a business as smart financing, marketing or manufacturing.

No prepared small business owner would dream of setting up a business without taking advice from an accountant, a solicitor or a bank manager — yet many try to handle their own insurance, causing themselves needless work and worry.

Get an insurance broker who specialises in business insurance to work with you...

When you are considering a contract with an insurer you need advice, just as you do when buying a factory, setting up a shop, or financing a new development.

What type of risks am I taking if I don't insure my small business?

We can classify risks into three broad categories:

• critical- involving losses that could bankrupt the business.
  
  
• important- which may not cause bankruptcy, but could still require the firm to borrow in order to survive.
  
  
• minor- which could result in losses that can be met out of current earnings, without straining the finances of the business.

How you assess the significance of various risks will depend on the size and financial strength of your business.

In other instances, a bank or similar lender may insist that you insure certain assets used as security for a loan; but in most cases, the decision whether to insure or not is up to you. An insurance broker can explain the options and help you make the right choice.

What kind of insurance do I need for my business?

Insurance for most types of business can be divided into three areas:

• Assets & Revenue — things that the business owns and their revenue generating capabilities.
  
  
• Liability — legal obligations arising from injury to others or damage to their property.
  
  
• Personnel — protection against loss arising from personal accident or illness involving yourself or your employees.

If you analyse your business activities from each of these viewpoints, it will help you identify what risks you face — and the appropriate insurance response.

Below is a brief checklist of the types of policies most commonly used. You may not need them all, or you may need some more specialised cover that is not listed here. You should consult your insurance broker before finally deciding.

Apart from checking the need for a particular type of policy, you should also consider the amount of insurance you need to purchase for each risk. Under-insurance can be nearly as dangerous as lack of insurance — either might imperil the very existence of your business.

• Fire Insurance — covers destruction of or damage to your buildings and contents through fire. Other perils may be added through extensions, usually at little extra cost — lightning, explosion, aircraft, earthquake, riot, malicious damage, storm, flood and water damage.
  
• Business Interruptions — provides cover if business is interrupted through damage to property by fire or other insured perils. This ensures that ongoing expenses are met and anticipated net profit is maintained.
  
  
• Burglary — covers against loss or damage to stock, goods held in trust and all contents for which you are responsible within the premises, by theft involving violent, forcible entry. Note that the insurance definition of theft involves force or violence, so cover does not normally protect against loss due to the dishonesty of employees or other people entitled to be on the premises.
  
  
• Loss of Money — cash and near-cash (postal orders, cheques, stamps) can be insured against theft from office or shop premises or loss in transit.
  
  
• Goods in Transit — is cover against loss or damage to your property while being carried by your own vehicles, road haulier, air, rail or post. Cover can be arranged within Australia, or on a world wide basis.
  
  
• Engineering Equipment — some plant, such as pressure vessels and lifting tackle, must be inspected and certified annually This service is often obtained within an engineering policy, covering all the plant and machinery used by a firm against risks, such as collapse, explosion and breakdown.
  
  
• Motor Insurance — vehicles must be insured for third party injury liability and should also be protected against third party property damage liability, or even against own damage (comprehensive) risk since they are usually of substantial value.
  
  
• Public Liability — covers you against claims by members of the public who may suffer injury to their person or damage to their property while they are at your premises, or you are working at their premises. Liability for goods in your care, custody and control is often excluded from a standard policy. If you use other people’s property (say under a lease or hire purchase agreement) or carry or store other people’s goods, you may need to insure them.
   
  
• Products Liability — if you sell, supply or deliver any sort of goods, even in the form of a repair or service, then you may need this protection against claims arising from goods allegedly causing injury or damage.
  
  
• Professional Indemnity — all sorts of people who are engaged in the provision of advice (not just the traditional professions like lawyers, doctors and accountants) can be sued for financial loss arising from errors or omissions, so may need such protection.
  
  
• WorkCover — covers claims arising from the death, injury or illness of employees arising out of their employment under workers’ compensation legislation or at common law, including legal costs incurred.
  
  
• Personal Accident, Illness or Disability — if you are unable to work, then the operation of the business may suffer, resulting in a loss of income. Alternatively, you may need to hire someone to work in your place. Either way, you need extra money to carry on, which this type of policy can provide. Unless you operate as a propriety limited company, you personally will not be covered by Workers Compensation.
  

Other insurances — depending on the nature of the business, may require additional or specialised policies such as:

• Glass breakage or signs
• Frozen foods or other stock deterioration
• Computers and computer records
• Business machines and equipment
• Legal expenses/tax audit
• Fidelity guarantee
• Credit/bad debts

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