What is business insurance?
Running a business can be personally and financially rewarding; however, it also comes with risk. Some of these risks may be known to you, while others may be completely unexpected.
To mitigate this risk, many business owners take out insurance policies to protect them and their business in the event that something goes wrong and they suffer financial losses as a result.
Depending on what policy you hold, business insurance can cover damage to your property, legal liabilities, lost income and more. Certain forms of insurance are also compulsory for most Australian businesses, while others are optional but advisable. Here’s an overview:
Compulsory insurance
Workers' compensation insurance
Employers must have workers' compensation insurance through an authorised insurer to financially cover the business for costs they’re liable for if employees suffer a work-related accident or illness. Rules may vary between states and territories, so check with the relevant regulator for requirements.
A few things to note: sole traders need to insure themselves against death, disability or illness because they can't cover themselves as an "employee" and independent contractors may need to get their own insurance.
Beware, if you don't pay for workers' compensation insurance, you may be subject to a double avoided penalty. This is a fine that’s twice the amount of money you'd have had to pay for insurance.
And if someone suffers an injury at work, you might also be prosecuted. So, if you're thinking about not buying business insurance, ask yourself: Can my business afford to take the risk?
Public liability insurance
Public liability insurance is compulsory in some industries and a condition of the license to operate. This form of insurance protects you if someone is killed or injured because of your negligence. It covers damages or injuries that happen on your premises, or that occur off-premises because of something your business has done.
Third-party personal injury insurance
If you own a motor vehicle, the law requires that you have third-party personal injury insurance, which you pay for when registering your vehicle. This applies whether your vehicle is for business or personal use.
Personal insurance
Income protection or disability insurance
Income protection or disability insurance covers you if you're sick or injured and can’t work. This insurance can help you pay your bills and meet other financial obligations.
Life insurance
Life insurance will give your beneficiaries a lump sum or series of payments if you die. This type of insurance can help your family meet their financial obligations if you're no longer around to provide for them.
Other types of insurance
Business interruption insurance or loss of profits insurance
If an insured event — such as a fire — shuts down your business, this insurance can cover costs.
Employee dishonesty or fidelity insurance
Should employees steal from your business, this type of insurance protects you from financial losses.
Management liability insurance
This insurance safeguards you against financial losses resulting from an illegal or unethical act by a director or manager.
Professional indemnity insurance
If you give professional advice or provide a service, this type of insurance can protect you from financial losses resulting from errors or omissions in your work. If you belong to any professional organisations, check your membership benefits — they may include professional indemnity insurance.
Total and permanent disability insurance
This insurance gives you a one-time payment if you become permanently disabled and can no longer work.
Trauma insurance
Trauma insurance provides a lump sum payment if you suffer a life-threatening illness like cancer or a heart attack.
How much will business insurance cost?
The cost of business insurance varies depending on several factors, including the:
amount of risk your business faces
level of cover you need
type of business you have.
Get a quote from an insurance provider to get an idea of how much business insurance might cost. And remember, the cost of business insurance is tax deductible.
What happens if you don't have business insurance?
Insurance is mandatory if you own a registered vehicle, work with crews on residential building projects valued at over $20,000 or have any employees (with some exceptions).
If you choose not to buy an insurance policy, you could face fines or even jail time. And if something goes wrong and you don't have the right insurance, you could be liable for any damages or losses.
This could include:
legal costs
lost income
repair bills.
When do I need to renew my business insurance?
Most business insurance policies renew annually. But depending on the type of policy, you might be able to choose a shorter renewal period — for example, six months.
Keeping track of when your policy is due for renewal will give you time to look for a better deal or make changes to your cover.
Some insurers will send you a renewal notice a few weeks before your policy expires. But it's a good idea to set a calendar reminder so you don't forget.
How do I submit a claim on my business insurance?
The process for making a claim on your business insurance varies depending on the insurer and the type of policy you have.
You'll need to notify your insurer immediately after the event that has caused the damage or loss. You'll then need to provide any supporting documentation, like:
copies of computer records
medical records
photographs
police reports.
And remember, you should always speak with your insurer before taking any action — for example, starting repairs on damaged property.
Disclaimer: To find out what's right for your business, consult an insurance broker or other suitably accredited professional. This guide is only general advice and not legal advice. You should always consult a lawyer if you have specific legal questions.
Keep your business running smoothly with MYOB
Starting a business is hard work. There’s a lot to consider, including all important business insurance. But when you have all the foundations in place, your next step is to launch your startup and build it.
MYOB can help. Our online accounting software offers powerful solutions for your finances, invoicing, payroll and much more. Whatever your business goals, MYOB has you covered.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.