Starting a small business insurance checklist
This article was originally published in May 2019 and has been updated.
Every business needs insurance, but there isn’t one universal policy for all businesses.
That’s because the cover required will depend on many factors including the business type, sector, industry and size. A real estate agent will face very different risks to a building firm, café or retail store.
“Small to Medium Enterprises (SMEs) can be faced with a unique set of risks they may not be aware of,” says Belinda Steedman, QBE’s General Manager, SME.
“Start-ups and new businesses can be particularly vulnerable, as one claimable event could potentially put them out of business.”
So where should a new small business start? Here’s a simple checklist to help.
▢ Define your business type and activities to help you understand your needs and the risks you face
Before you choose a business insurance policy, you’ll have to evaluate your needs including what’s legally required to run your company as well as the individual risks you face.
There are more than two million SMEs in Australia and each one is different. Some SMEs may also have to meet specific legislative requirements or obligations as a member of a professional board or association. Or they may have contractual responsibilities as in the case of landlords to customers.
For a small to medium business, insurers often bundle their business insurance products into commercial packages which will meet the typical needs of a number of industry or sector-specific businesses. This could include cover tailored to tradespeople, professional services providers or commercial landlords.
A business insurance package is usually designed for SMEs because it bundles a variety of broad coverages and can be more cost effective than buying multiple separate policies.
▢ Consider insurance to protect your assets
Insurance to protect your physical assets you need to run your business should be a key consideration, explains Steedman.
“Key business assets can include your property or business premises, stock, tools, computers and more.”
“For example, if you own a local café, you may want to consider property insurance to cover your building, furniture and stock against events like fire, storm or malicious damage,” she adds.
▢ Consider insurance for your revenue
“Another consideration is business interruption insurance, designed to cover cash flow which can help to protect the owner’s income stream and get the business back up and running if something goes wrong,” says Steedman.
Business interruption cover pays for ongoing costs that continue after an insured event, regardless of whether the business is closed or substantially affected. These costs include rent, mortgage repayments, fixed electricity, and gas and water charges. It also covers additional costs incurred to minimise the effects of the closure or downturn, plus net profit and/or loss.
For example, a metro retailer’s ability to trade would be severely impacted if a water main bursts outside its premises, cutting off access and reducing customer traffic, causing takings to drop for weeks on end while the council attempts to find a fix.
▢ Consider public liability insurance
Public liability insurance covers a business for the costs associated with legal action and damages if they’re found liable for injury or death of a third party, loss or damage of property, or economic or financial loss that happened because of negligence.
Steedman warns, “Being sued for negligence can be very costly, from both a financial and reputational standpoint.”
For some industries, liability insurance is compulsory before you can legally operate, for example, construction or businesses arranging public events or operating certain types of facilities.
▢ Consider professional indemnity insurance
Some occupations rely on an individual to provide a professional service or advice to other businesses or people. These occupations, for example accountants or estate agents, face the risk of having an allegation made against them which they may need to defend in court.
Professional indemnity insurance covers small businesses if the business owner is found liable for negligence, if they breach their professional duty or if they make mistakes or omissions that result in financial loss for another person or company.
▢ Consider commercial motor insurance
“If you regularly use a vehicle or small fleet of vehicles within your business, it’s also worth considering commercial motor insurance,” says Steedman.
Vehicles can range from cars to visit clients, to utes or delivery vehicles. You can choose from different levels of cover, and commercial motor polices typically offer additional benefits including no windscreen excess for certain vehicles, driver repatriation, sign writing and cover for replacing keys and locks.
▢ Understand your legal obligations
To operate a business in Australia, some forms of business insurance are required by law. Here’s a general overview.
If you have employees, you must have workers compensation insurance.
Work, health and safety laws in Australia require that if an accident or illness occurs during people’s work, they must be able to access first aid, workers compensation and rehabilitation to return to work.
“As employers, business owners have a legal obligation to take care of their employees,” reminds Steedman.
“Workers compensation is the key statutory cover for businesses, to cover workers for workplace accidents.”
Third party personal injury insurance
If you have a car or multiple cars for your business, third party personal injury insurance, also known as Compulsory Third Party (CTP) insurance, is also compulsory by law.
▢ Decide how you'll purchase your insurance and get expert help if you need it
How to buy business insurance - direct or through a broker?
Insurers often provide insurance directly to a range of small to medium businesses.
QBE’s Small Business Pack^ is available direct to a variety of small to medium businesses, including trades, hospitality, health and beauty, retail and professional services. If you know what you need and are ready to buy, you can apply for the Small Business Pack online.
If your business risks are a little complex or you’d prefer an expert to take care of your insurance needs on your behalf, you may prefer to appoint a broker.
▢ Find a broker if you require professional expertise
As business insurance experts, brokers can find the policies that best meet your business needs. How do they work?
They’re best described as licensed individuals or firms that serve as intermediaries between insurers and business owners to negotiate insurance policy contracts.
Brokers are often viewed as professional trusted advisors and can offer strategic risk management for business. They can also help business owners who operate in niche sectors with specialised insurance needs that might not be included in a package, for example, bed and breakfasts or 24-hour convenience stores.
So how do you find a good one? If you don’t have a reliable personal recommendation, the National Insurance Brokers Association (NIBA)* can help you find an accredited broker.
^This is the QBE Business Pack Policy Wording (QM163).
*The brokers on this site are not employees or agents of QBE, but are independent entities, QBE is not responsible for any advice provided to you by any broker on this site. Any such advice is the responsibility of the broker concerned.