Start-Up? Here are Important Risk and Insurance Tips

Start-Up? Here are Important Risk and Insurance Tips

Starting a new business is exciting. Here are some tips to help choose the right type and amount of insurance cover.

Each business has different goals, needs and risks. Importers, for example, have a high product liability risk and potentially a recall risk, whereas the main risk for a professional is their advice causing financial loss.

Talk with a Qualified Insurance & Risk Adviser

Talking to a qualified adviser to discuss your needs and goals will pinpoint the types of insurance cover to be considered, budget and amount of cover/ sums insured. This will save you time and money.

Compulsory Insurance

Workers Compensation

If you employ part-time or full-time staff (including some contractors), you’ll need to have workers' compensation insurance in place before you open the business. This policy covers the wages of employees while away from work injured or a lump sum if permanently injured. It’s important to check if you’re covered as a working director, as some states and territories don’t provide you with cover. In this case personal accident and sickness is recommended.

Motor Vehicle Compulsory third party (CTP)

CTP motor vehicle insurance is required if you own a motor vehicle. It pays for personal injury to passengers, as well as pedestrians. CTP is different to the Third-Party Property Damage or Comprehensive insurance, which covers damage to other people’s vehicles or property or your own vehicle (comprehensive cover).

Optional Insurance

Personal Accident & Sickness

Personal Accident insurance covers you and pays weekly benefits if you cant work if illness or due to an accident, cover is for 24 hours/ 365 days. The policy will pay a lump sum if your permanently injured.

Public & Products Liability Insurance

Provides cover for legal defence costs and damages awarded by a court for injury to people or their property arising from your business or products.

Business pack Insurance

Business insurance works well for small businesses as it can be tailored specifically to your needs. This means you only pay for the cover that's needed from a range of covers that includes:

Fire, storm, lightening damage to buildings, stock and contents;

Accidental damage:

Business interruption insurance;
Burglary/ theft;
Public & Products liability insurance;
Loss of Money;
Glass;
Equipment breakdown;
General Property, taken outside the business.

Professional Liability Insurance

If you’re a professional and give advice or provide personal services, then this policy is important. It provides cover is a client complains that you have injured them or they lost money after acting on your advice (accountant). for Pays for your legal defence costs and any damages awarded by a court for financial loss allegedly caused by negligence professional advice.

Cyber Liability Insurance

Covering loss to your business and IT system, as well as liability to other people for loss of personal information or passing on malware, due to cyber-attacks, fraud and email phishing scams etc. Cover can include:

Incident response – specialists to identify malware issue and pay for repair;
Lost income and your additional costs;
Data recovery and restoration;
Consumer notification costs and ongoing monitoring costs;
Legal defences costs;
Cyber extortion management and fees;
Crisis and PR management of the incident; and

As one of Australia's and New Zealand’s largest general insurance broking and risk advisory intermediaries, we have over 270 offices helping people and businesses manage risk and advise of the appropriate amount and type of insurance.

We are also a member of the National Insurance Brokers Association and pride ourselves on our commitment to acting in accordance with the NIBA Code of Practice. If you are thinking about talking to a professional, licenced insurance and risk adviser to get advice for you and your business, get in touch with an insurance adviser nearest you.

General Advice Warning

This communication including any weblinks or attachments is for information purposes only. It is not a recommendation or opinion, your personal or individual objectives, financial situation or needs have not been taken into account. This communication is not intended to be a constitute personal advice. We strongly recommend that you consider the suitability of this information, in respect of your own personal objectives, financial situation and needs before acting on it. This document is also not a Product Disclosure Statement (PDS) or a policy wording, nor is it a summary of a particular product’s features or terms of any insurance product. If you are interested in discussing this information or acquiring an insurance product, you should contact your insurance adviser to obtain and carefully consider any relevant PDS or policy wording before deciding whether to purchase any insurance product.

Business Interruption Insurance

From your family and employees to customers and suppliers, there are a lot of people who depend on your business opening its doors each day.

Business Interruption Insurance

What is Business Interruption Insurance?

Business interruption, also known as Loss of Profits or Consequential Loss Insurance, is a special insurance cover. It pays the business owner any fixed overheads and similar business costs following a fire, storm damage or other major events that prevent a business from trading. This insurance starts from the time of the fire until the business is back up and running to where it was before the damage occurred.

Why is Business Interruption Insurance important?

Starting and running a business always carries risks. The key financial risks can be managed by buying insurance cover like Property Damage, Public and Product Liability, and Burglary.

For businesses of any size, Business Interruption Insurance is essential to ensure that money continues to be received (from the insurer) to pay fixed expenses – such as lighting, power, bank loans, wages, transport, plus net profit related to a reduction in turnover.

What does Business Interruption Insurance cover?

Business Interruption Insurance compensates business owners for:

net profit expected to be earned during the time the business takes to get back up and operating to its pre-loss output
any fixed expenses (interest on loans, wages etc.), that keep on being incurred, regardless of whether the business is operational or not.

Variable expenses, like input purchases and delivery costs, would not be covered, as they won’t continue if the business isn’t operational and making goods or products.

The time period for getting the business back up and running to pre-loss levels (plus any expected growth) may take a few weeks or many months, depending on how badly damaged the business was, the loss of customers, and other factors. Working out the maximum time you need insurance for is important – but 12 months is a good place to start.

Choosing your insurance policy

Key factors to consider when choosing the basis of cover, which will impact your premium, include:

Indemnity period. How long do you need the cover for? Depending on the situation, how long will it take your business to return to pre-loss trading?
Payroll. How much of your payroll do you need to insure and for how long? Insurance companies won’t pay employees to sit at home for six months while the business is being rebuilt, but redundancy payments can be insured.
Growth. Consider the trends in your business: is it growing rapidly, or is it a mature business?
Economic cycles. Are there any major seasonal fluctuations or economic cycles?
Suppliers and customers. Do you need to cover specific customers or suppliers that you rely on. If they couldn’t operate, would it impact your business?
Additional or increased costs of working. Most businesses spend a lot more money in the short term to try and minimise the impact on their business. For outsourcing a valued customer's work to another business for a short while, or if you own a building that’s fire damaged when your business is located, and you need to rent premises for manufacturing, this will be a new additional cost of the rent.

Frequently Asked Questions

● How Is It Calculated?

There are two main ways to purchase this type of insurance:

Weekly income or Sales
Annual gross profit (being 12 months turnover less variable expenses, also insuring net profit).

Does it cover loss of profits for services firms?

For example, solicitors, investment consultants, and medical or dental practices. As many of these businesses can continue to operate from home or serviced offices, gross profits are generally not insured, only additional or increased working costs.

However, businesses that depend on their specific location, such as dentists or allied health, that have their customers in a specific area may consider Gross Profits Insurance.

In Summary

Storms, natural disasters, and fires are regular occurrences in Australia. Major interruption to business, where there is no income for an extended time, is one of the most significant risks a business will face, regardless of its size or industry. A large percentage of businesses that don’t have Business Interruption Insurance never reopen. It’s difficult to pay employees or mortgage costs, suppliers or even the power bill if there is no sales or revenue.

In addition, trying to get your business back on its feet can be overwhelming – taking management’s focus away from day-to-day business, as well as placing significant financial strain on you and the business.

We can help you find the best cover to keep your business running as smoothly as possible.

From your family and employees to customers and suppliers, there are a lot of people who depend on your business opening its doors each day.