When building a business, you’re bound to juggle multiple tasks. From recruiting the right team to acquiring the necessary documents to operate legally, these tasks are necessary to ensure that you’re conducting business responsibly.
One crucial thing that every business owner should prioritise is obtaining insurance policies for their business. Running a business is a risky endeavour, and insurance is the perfect safeguard to help provide financial protection in times of dire need.
That said, no single insurance policy covers every hiccup faced during business operations. As such, businesses may need multiple insurance policies to cover the likely risks that they may face.
Unfortunately, not every entrepreneur is aware of the best insurance policy for their business. So, if you’re in the same boat, this article will outline some necessary insurance policies you should get for your business.
Let’s jump straight into it!
1. General Liability Insurance
When first growing your business, you’re likely still learning and moulding to market conditions. Your product may be a hit and even be compliant with local regulations, but it’s not infallible in being the cause of damage to a person or their property.
Customers who experience bodily harm or property damage due to your product or service may file a lawsuit against your business. General liability insurance protects your finances in such cases, covering the amount stipulated in the lawsuit, the cost of legal defence, and settlement costs. To manage these complexities effectively, many businesses turn to insurance outsourcing services, which help streamline policy management and ensure optimal coverage.
Furthermore, this insurance covers events that might occur during operations, not just those related to products or services. For one, it covers medical bills from accidents like customers slipping on a wet floor. It also covers the costs of reputation harm made to another business.
This type of insurance is essential and one of the first insurance policies you should get for your business. When claiming a payout, it’s imperative that you declare the right figure when filing taxes. You can use a TPD Taxation Calculator from Curo to help you accurately calculate your taxes.
2. Commercial Property Insurance
Commercial property insurance helps protect your physical assets from risks like theft and fire.
Specifically, this insurance policy covers the cost of the building as well as the furniture, equipment, and inventory that has been damaged within the property. It also covers damages to exterior fixtures like signs and fences.
If you own the commercial property, this policy extends to cover building damages up to the agreed-upon amount. If you’re renting the property, it’ll only extend to the supplies, equipment, inventory, and other contents within the vicinity of the building.
That said, if you paid to make enhancements to a space—then damage to those upgrades can be covered under this insurance as well.
3. Professional Liability Insurance
Also known as errors and omissions insurance, professional liability insurance helps ensure that one mistake or oversight won’t financially ruin your business.
If your company is service-oriented or within the consultation industry, then professional liability insurance protects you against claims of negligence, malpractice, and errors that have caused financial loss to a client.
Besides consultants, lawyers, accountants, doctors, and architects could use this form of protection to help pay off any lawsuit made against them. It covers both the cost of a legal defence as well as the damage sustained by the client.
Depending on the industry, PLI may or may not be mandatory for Australian businesses. Review your respective industry information site to know whether your business needs one or not. But even if it’s optional, having it is a good move for extra protection.
4. Workers’ Compensation Insurance
A mandatory insurance policy your business should have is workers' compensation insurance. This insurance covers the loss of income incurred by a worker who is injured or ill because of work.
This type of insurance helps pay for the compensation they would have otherwise gotten if they worked under normal conditions. It helps support your business by shouldering the wages and medical benefits of the injured or ill workers. It also pays for ongoing care needed as a result of the injury.
For businesses with multiple employees, especially in more dangerous fields like construction or farming, this type of insurance is necessary to protect both workers and employers from financial devastation due to hospital or legal fees.
If you’re found to not provide this insurance by the government, you can face penalties or fines depending on your state’s law.
In case of worker death, this insurance also covers death benefits like funeral costs to the workers’ dependents. This insurance also relinquishes employees' right to sue their employer in case of incidents. For specific details regarding the law, what you can claim and the steps to take, see James Scherr Law's construction accident information.
5. Business Income Insurance
If your business suddenly becomes unable to operate because of property damage or government-mandated closures, then business income insurance helps provide financial aid in such events.
This insurance covers the rent, utility, wages, and lost earnings based on historical financial records. It may also be referred to as business interruption insurance.
This insurance makes it easier for businesses to meet financial obligations and debts, which subsequently allows them to resume operations more smoothly once they regain control of their business.
6. Commercial Auto Insurance
Do you utilise a vehicle during operations? Then, having commercial auto insurance is a no-brainer.
In Australia, car insurance is mandatory. This applies to personal cars as well as delivery trucks, service vehicles, and company cars.
This type of coverage protects damages during collisions. This can be either one-car turnovers, vehicle-to-vehicle collisions, or vehicle-to-property collisions.
It also covers liability costs for non-collision damages. For instance, if your company car is a victim of theft or natural disasters, you may also be eligible for a payout depending on the terms of the contract of your insurance policy.
This insurance is vital for helping your business vehicle stay legally compliant while also granting you peace of mind by ensuring that accidents won't become financial burdens.
7. Product Liability Insurance
Product liability insurance covers risks associated with products made, distributed, or sold by your company. It protects your company from claims of injury or damage to the customer or their property due to defects in your product.
For instance, if your lawnmower product malfunctions and electrifies the consumer, then this insurance will cover the medical bills and the settlement or legal fees made by the complainant.
Unlike general liability insurance, product liability insurance is focused only on issues arising from your products, not the entirety of business activities.
8. Cybersecurity Liability Insurance
If your company stores sensitive data in cloud storage or servers, cybersecurity liability insurance can be a huge help. It covers the costs associated with recovering and restoring data and system repairs in case your business is preyed upon by cyber threats.
Furthermore, it also pays for legal fees and settlements that may arise from data breaches. This insurance is helpful for companies that face a high risk of being hacked, such as government agencies or software companies.
However, bear in mind that this insurance doesn’t provide payouts for preventative measures like anti-virus software.
9. Commercial Umbrella Insurance
If you want an extra layer of financial security on top of your other insurance policies, commercial umbrella insurance is the perfect solution. This insurance can be called upon when your primary policy’s limits are used up, and you still need extra financial aid.
For instance, if your commercial auto insurance coverage is below the total repair bill, you can lodge a claim with a commercial umbrella insurance provider to settle the difference up to the agreed coverage.
10. Directors and Officers Insurance
Also known as D&O insurance, this insurance helps protect personal assets owned by directors and officers of the firm, such as yourself, if you are sued for alleged actions that harm another party.
This insurance covers legal fees and court costs. Typically, this insurance is only available for entrepreneurs who operate publicly listed companies. It can help preserve both an individual’s personal finances as well as the business’s finances.
Conclusion
Obtaining the right business insurance policies is crucial for all business owners, regardless of company size or industry. By carefully considering your specific risks and choosing appropriate coverage, you can ensure financial protection and safeguard your company's future in the face of unexpected events.
