Understanding Small Business Insurance

Understanding Small Business Insurance

Protecting what’s important to you

Running your own business can be extremely satisfying and rewarding, but it often also means hard work and long hours. And while simply making a profit can be challenging enough, would you be able to meet the financial costs of an unexpected event such as a lawsuit, burglary, fire, or natural disaster?

That’s why one of the keys to sustaining the dream of working for yourself, is to make sure your business assets and your cash flow are adequately protected by the right levels of insurance cover.

Without such protection, that dream could end abruptly.

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Start by understanding your risks

Every business is different, so the first step in shopping for insurance is to start by listing the areas of risk that are relevant to your business. If you have premises and carry stock, some of the things that may concern you might include, damage to the building, stock losses (such as through theft) or someone being injured while on your property.

Next, it is useful to list other exposures that could cause a dent in your profits. For example, a supply chain interruption may leave you unable to trade for an extended period of time. Could you continue to pay rent or meet other fixed overheads during that time?

Finally consider any exposures that you're willing to self-insure (take the risk on yourself), or for which you would be prepared to pay some of the loss in return for a lower insurance premium and ensure you fully understand your legal obligations as a business or employer of people.

Know what others in your industry are doing

If you belong to a well-formed industry network, you should try to benchmark yourself against your competitors or peers. This will assist you in understanding whether or not you have covered the prominent risk exposures within your niche or sector. A good insurance broker will be able to tell you what others in your industry spend on insurance – typically anything from 1% - 3% of turnover.

Talk to an expert

Although there are many small business insurance products available online, there is a real and long-term benefit in consulting an expert, such as a reputable insurance broker.

Brokers work on your behalf and in your best interest — not the insurers. And although there is a lot of business insurance information available online, just missing one small technical detail could make a huge difference in the event you need to make a claim. An insurance broker will also ensure that your policy has been issued by an Australian-based insurer that complies with the Australian Insurance Act.

It’s also worth talking to your accountant or financial advisor and seek their input.

The fine print counts — and there can be lots of it

The wording of a standard business package insurance policy is on average about 150 pages long. From exclusions and write-backs to various interpretations of one term or condition, such documents are full of insurance jargon. And while it is easy to simply assume that everything is the way it should be and click ‘I Agree’ to the terms and conditions, you’re cutting dangerous corners when buying a policy without fully understanding what it covers. Again, this is where the experience of a dedicated business insurance broker can make a big difference.

After all, the proof of any insurance policy is when you need to make a claim. And that’s not the time to be reading the fine print to find out whether or not you’re covered.

As your business risks change, so should your cover

In a world of change and evolution, risk exposures are constantly changing. With almost every business relying to some extent on the Internet, or at least using computer systems with online access, there is a strong need for most small business owners to consider some form of cyber-liability insurance policy. In fact it’s the small business that’s most at risk from cyber-attack, not large business as many would assume.

Likewise, as your business grows and your risks change — or their potential financial impact  increases — it is important to make sure that your policies are reviewed and updated, to ensure they continue to provide the right level of cover.

Surround yourself with experts

One of the surest ways to build a solid business is to access the best advice and people for things that are outside your skill set or expertise.

In the same way that you would hire a lawyer to advise you about a complex contract, or to protect you against legal action by a client, supplier or employee, it simply makes good business sense to hire an insurance expert to help protect your business and brand.

To put it simply, speak to an insurance broker.

Find the business insurance thats right for you