There are various types of insurance policies out there for business owners in Australia, and if you are looking to start a business and you are curious about the type of policies at your disposal, then you might want to continue reading this post.
In this article, we will tell you all you need to know about the various business insurance available in the country, as well as, the pros and cons owing to the types of business insurance.
What Is Business Insurance and Why Is It Important?
Business insurance is a type of insurance coverage that is designed for businesses to protect the business’ assets, employees, properties, and business owners from unexpected liabilities and risks that come in the form of theft, lawsuits, employee injury, and many others.
In case of any of these risks, your insurance company will provide financial support to help alleviate the situation, minimizing the financial implication the risk would have had on your business.
Each business is susceptible to risk; however, if you have business insurance in place, it provides a sort of financial cushion to help you either completely or partially mitigate the risk.
Types Of Business Insurances In Australia?
There are various types of business insurance policies available to businesses in Australia, however, they are generally categorized into two; those required by the laws of Australia which every business must have, and the optional ones.
1. Business Insurance Policies Required By Law
There are three business insurance policies required by the Australian government; these include:
- Worker’s Compensation Insurance
- Third-Party Compensation Insurance
- Public Liability Insurance
Let’s take a deep dive into each:
i. Worker’s Compensation Insurance
It is important to note that this insurance policy is mandatory if a business has employees. That being said, worker’s compensation insurance provides coverage (medical expenses, rehabilitation costs, and wage benefits ) for workers/employees who get injured or ill while executing job duties.
In the case where the employee dies in the process of executing their job duties, the insurance will pay out death benefits to the family.
It is important to note that sole proprietors aren’t eligible for worker’s compensation insurance. And for businesses that may employ a contractor for a job, you may have to check your state rules governing this type of insurance, as it varies from state to state.
ii. Third-Party Personal Injury Insurance
By law, this type of insurance is mandatory for businesses that own motor vehicles. Third-party compensation insurance provides coverage if your business gets sued by a third party as a result of damages or injury caused by an employee of the business.
For example, if an employee or even the business owner is using a company’s vehicle for business purposes and then gets into an accident that causes damage to someone’s car, property, or body, your third-party insurance will cover the cost of that in case you get sued.
iii. Public Liability Insurance
The last compulsory insurance policy that is mandatory for some businesses in Australia is public liability insurance. Public liability insurance provides coverage for expenses that arise as a result of injuries and damages caused by your business (usually within your business premises) or damages caused by your products to the general public.
For example, if a customer visits your shop, and then assumes an employee cleans the floor and then forgets to put up a caution about the floor being wet, and then someone slips and falls, the person can sue your business, and in such instances, a public liability insurance will cover that.
2. Other Insurance Policies
The Australian government recommends that businesses get the following insurance:
- Personal or Loss of Income Insurance
- Stocks Products, Assets Insurance
- Accident and Liability Insurance
- Technology and Cybercrime Insurance
It is important to note that these insurances have various policies under them.
i. Loss of Income Insurance
This insurance policy provides coverage for businesses that encounter loss of income by covering the cost of certain business expenses such as a mortgage, employee payroll, and any other cost agreed in the policy.
ii. Stocks Products and Assets Insurance
These types of insurance policies provide coverage in cases where the valuable properties of a business are damaged, stolen, or destroyed.
iii. Accident and Liability Insurance
This type of insurance provides coverage for businesses if their business or any property of the business causes damage to a third party or property.
Some examples of this insurance include:
- Management Liability
- Product Liability Insurance
- Public Liability Insurance
- Professional Indemnity Insurance
iv. Technology Insurance
With most businesses leveraging one or many forms of technology to enhance business operations, getting technological insurance is highly recommended. This type of insurance policy provides coverage that arises from cybercrime activities or theft of technological equipment.
Pros and Cons Of Business Insurance?
Even though most of the insurance policies outlined in previous subsections might seem enticing, there are certain pros and cons of business insurance one must consider when going in for business insurance.
Pros of Business Insurance:
- Peace Of Mind
Once your business has some sort of business insurance in place, you can be assured that certain unexpected costs will be covered by your insurance policy given that it is within your insurance policy contract. Also, by knowing that certain aspects of your business are covered, you will have the flexibility to channel your focus and energy to other aspects of your business.
- Makes Your Business Attractive To Investors
If you are looking to expand your business, then you will certainly be looking for investors or lenders. However, before some lenders or investors put money into your business, they may require that you have certain insurance policies in place to guarantee that they do not encounter certain liabilities while doing business with you. Therefore when you have various insurance policies in place, it increases your credibility in the eyes of investors.
As stated earlier, the Australian government requires that businesses have certain business insurance to operate their business in the country. Therefore, by having these policies in place, you can be assured that you wouldn’t face any sanctions from the government.
Cons of Business Insurance:
Whether your business incurs any liability or not, you will be required to pay your premiums to keep the insurance active. And in a situation where a business signs up for various insurance policies, paying these premiums can get expensive.
Some insurance policies outlined might not cover 100% of claims. Most insurance policies have limits on what they will cover and to what extent they will cover, therefore, you need to ensure that you read the contract of the policy to make an informed decision.
Applying for business insurance isn’t a straightforward process; it is going to require a lot of documentation and back and forth. Also, some insurance companies take a while to cover claims, as they will require proof and conduct their investigations before making any payment.