Most people dread having to make a call to their health insurance provider or their car insurance agent. For small business owners, navigating the realm of business insurance can be even more daunting–but it doesn’t have to be. Armed with some basic information, you can confidently make the best insurance choices for your small business.
There are certain situations in which a small business owner is required to purchase insurance, with no exceptions. It is imperative to research the requirements as they apply to your small business, to ensure compliance and avoid jumping through legal hoops down the road.
If your business employs people, you are obliged to take out workers’ compensation insurance. If workers are injured or fall ill on the job, the law requires that they have access to multiple levels of care (including first aid, compensation for additional care, and rehabilitation to return to work). Workers’ compensation insurance provides coverage for all this, protecting what is arguably your business’ best and most important asset: your team.
If you own and operate a company vehicle, you must buy third party personal injury insurance. This covers claims made against you for personal injuries arising from the use of your company car. This is often included in your vehicle’s registration fee, but be sure to check when registering your vehicle.
Another type of insurance you should consider for your small business is liability insurance. While not often legally required, liability insurance can protect your assets in case of a lawsuit. There are several different types of liability insurance to consider.
Public liability is the legal liability arising out of your business activities but not arising out of your products. Legal liability is made up of liability under statue and torts, where liability arising out of one’s negligence is one of the more common torts. Negligence is defined as the failure to use reasonable care to prevent foreseeable harm. Products liability protects your company in case you are held legally liable for damage or injury arising from your products. Therefore, if the goods you have sold end up causing injury, death, property damage, or even psychological distress, your business can be held liable. Product liability will protect you in these cases.
However, certain liabilities are excluded from liability coverage, such as if you enter in a contract and accept additional liabilities that would not apply if you would not have entered into the contract. Please consider the terms, conditions, limits and exclusions in the PDS.
Professional indemnity covers your civil liabilities for damages arising from the provision of your professional services. These liabilities could be incurred by any number of incidents, from breaching a contract with a customer to making a mistake in the course of your business.
Professional indemnity is particularly important for service providers who are likely, in the course of their business operations, to provide advice to their customers. If this advice turns out to be bad advice (for the customer’s circumstances), you’ll be glad you have the backing of professional indemnity insurance!
Beyond the two required cases and the various flavours of liability insurance, there are quite a few other types of insurance to consider for your small business.
Several types of insurance protect your company’s physical assets and property. These policies will protect your property from damage caused by fires, earthquakes, floods, malicious damage, and more. A special type of property insurance will provide extra coverage for your business’ electronic devices and data. If you often ship goods (either those you sell or those you buy for your business) by land, air, or sea, you can opt for “goods in transit” insurance to cover the loss of or damage to these goods.
Other insurance policies protect your business’ intangible assets. Burglary insurance is especially important for businesses that aren’t constantly attended to. You can purchase insurance to cover losses caused by employee theft or fraud. If your business is audited or investigated, tax audit insurance can cover the cost of fees.
Clearly, it can be tricky to decide which types of insurance are right for your individual business. It’s always wise to consult an expert in small business insurance, and always review your policies and paperwork regularly.