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Business Insurance Explained

As we all know running a business is challenging and understanding all of the aspects of the business that you need to protect can be difficult to understand and time consuming to resolve. I think most people understand that they need to insure their car and home but what cover do you need for your business and how do you get the right price?

There are many different types of Business Insurance policies and just as many different Insurers in the market – so how do you navigate all of this and make sure you have the right protection for your business?

The purpose of this blog is to provide a high level overview of the different products available and some of the insurance terminology that you should be aware of.  Thanks to the website Understand Insurance, a publicly available resource from the Insurance Council of Australia, information to help you navigate your way through what you need to know is at hand.

Key Tips:

  • Increasing your excess can help reduce your premiums
  • Getting the right level of cover for example if you are buying Public Liability Insurance there are different limits available for example $5m, $10m or $20m and the prices changes in each case but it doesn’t necessarily double as the sum insured increases.
  • You could consider a bundled product or you could customise the individual components and tailor the insurance for your needs
  • Don’t just pay your renewal each year, Insurer’s change their pricing regularly so you need to make sure that you still have the best price. Using a broker can give you access to getting quotes from multiple insurers which will save you time and potentially money as well
  • You can also ‘Premium Fund’ the Insurance which means you can pay in monthly instalments there are costs involved but they can also be a potential tax deduction.

In each instance making sure the Policy provides the cover you need is important before purchasing anything.

Insurance Terms

There are a lot of complex jargon used in Insurance here are just some of key terms that you may come across:

PDS   

Policy Disclosure Statement – this is the contract that the Insurer is entering        with you, it outlines what is covered and importantly what is not covered (Exclusions) and also what special conditions may be required.

Policy Schedule  

This document outlines all of the details of your business that is covered i.e. address, specified equipment and also outlines the financials, Premium, Taxes etc.

FSG    

Financial Services Guide – this document outlines how the person you are dealing with earns their income for example: Commissions.  It also provides detail on the compliance and legal details of the company who is providing the advice.

COC/LOC     

Certificate of Currency/ Letter of Currency – this confirms that the Policy is in place as at the date of the letter.  It can be required by other businesses to confirm that you have adequate cover.

Excess  

The amount you will need to pay when a claim is made against the Policy.

Types of Insurance

How do you know what you need? Some of the questions you may ask yourself?

  • Do you provide professional advice to your Clients – this may mean that you need Professional Indemnity Insurance
  • Do you provide products as a part of your business – this may mean you need Product Liability Insurance or Transit Insurance
  • Do you have employees that need to be protected ie Workers Compensation
  • Are there assets within the business that need to be protected – ie Property Insurance

Professional Indemnity         

Protects you from legal action if someone suffers a loss after following your professional advice or as a result of receiving your service.

Public Liability            

Covers your business for legal costs and compensation costs that you might have to pay if you are found liable to someone because you caused death or injury, loss or damage to their property, or economic loss due to your negligence.

Product Liability  

Businesses that supply, deliver or sell goods, even in the form of services or repairs, may need cover against claims of goods causing damage, injury or death. Product liability cover protects you if any of these events happen to another person or business by the failure of a product you are selling.

Business Interruption     

Covers businesses that suffer a loss because they cannot trade for a period of time due to loss or damage from a weather event, flood, fire or other insured interruptions.

Workers Compensation 

Workers’ Compensation insurance is compulsory in all states and territories for businesses with a certain number of employees. For more information click here.

Goods In Transit

Covers the loss of, or damage to, goods you buy, sell or use in your business when they are in transit by road, rail, air and sea. It also covers damage to property – such as tools and equipment – while in transit within a defined set of geographical limits.

Property   

Covers damage or loss to buildings, contents and stock caused by insured events and accidental damage.

Deterioration of Stock

Covers businesses for the deterioration of chilled, refrigerated or frozen goods and stock if a refrigerator or freezer unit storing these goods breaks down and spoils the items.

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