This IPitch guest article was kindly supplied by Cathy Habas.
Insurance: everyone needs it, but not everyone understands it! Insurance can seem like a complicated mass of paperwork that merely results in yet another monthly payment to add to your roster, but it doesn’t need to be such a headache.
In fact, the whole point of insurance is to protect you from future headaches. When something goes wrong and you lose part of your investment, insurance ensures that the loss doesn’t hurt you so much. It’s like a parachute or a safety net.
What kind of insurance do you need? As you’ll see below, if you operate a business in Australia you definitely need two types of business insurance right off the bat. Then there are a handful of common liability insurances that are useful regardless of your industry. Finally, there are some specialty insurance plans meant to manage the risks associated with certain business sectors, such as those dealing with perishable goods.
The information below should serve as a good primer for the types of business insurance available, but once you have a better understanding of what you might need and why you might need it, consult with a few different insurance agents to find a great deal. Note that consulting an insurance agent is free; they only get paid if you sign a contract! So take the time to develop an insurance plan that you are comfortable with.
Two types of compulsory business insurance
In Australia, there are two types of business insurance that are mandatory for the majority of businesses: Worker’s Compensation and Compulsory Third Party insurance.
· Worker’s compensation protects employees in the event of an on-the-job injury or accident. It covers lost wages and medical expenses and releases the worker of any right to sue the employer over the incident.
· Compulsory third party insurance is a type of motor insurance that protects the driver of the vehicle for any incident he or she causes. Each Australian state has slightly different rules and regulations regarding Compulsory Third Party Insurance, so it’s best to consult your local branch of NRMA Business Insurance.
Common business insurance choices
An insurance agent can give you the full run-down of insurance options that make sense for your profession, but some common types of business insurance include:
· Business interruption: If a natural disaster, flood, fire or other specified event means that your business has to shut down temporarily, this type of insurance covers losses.
· Product liability: If the product you sell (or service you offer) causes damage or harm, this insurance protects you from being held responsible.
· Professional indemnity/liability: If your business involves giving people professional advice or providing services, this insurance protects you in the event of damages or loss incurred as a result of your service or advice.
· Property: If a natural disaster, accident or other specified event causes damage to your building, stock or other property, this insurance covers said losses.
· Public liability: If members of the public visit your premises or property, this insurance covers you for any losses sustained by anyone as a result of your negligence.
Specialty business insurance choices
Other types of business insurance may be essential for some professions and a wasted investment for others. Here are just a few specialty business insurance choices that you should review with your insurance agent:
· Computer and electronic equipment: If the computers or electronic equipment you rely on to carry out your business are damaged, this insurance covers the cost of that loss.
· Deterioration of stock: If you sell perishable stock, this insurance covers the loss of said stock in the event that a refrigerator or freezer fails.
· Glass: This insurance covers the cost of replacing any glass, including glass products, that may be damaged.
· Goods/property in transit: Whether being transported by plane, train, cargo ship or truck, goods that are damaged during transit are covered by this insurance. Geographic restrictions may apply, however.
· Machinery/equipment breakdown: If your business revolves around the use of machinery, you’ll certainly want to be covered for losses or damages that result from a failure, breakdown or malfunction.
· Money: If there’s a good chance that your business, vehicles or even private residence may be robbed, money insurance is a wise choice.
There are even more types of specialty insurance options that apply to unique niches and industry sectors. For example, the insurance requirements for the hospitality industry are more complex, as are those for 24-hour convenience stores and even nightclubs.
To prepare for your meeting with the insurance agent, make a list of all of your business assets and any possible scenarios where things might go wrong and you could be sued. This will help you to ask all of your burning questions and cover all of your bases. Good luck!