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What insurances do I need for a start-up business?

What insurances do I need for a start-up business? 

We are often asked what insurances are required for a start-up business. However, the answer is not always that simple. It will depend on the type of business, the industry, the legal entity type, whether there are employees or not and various other factors.

Without knowing any of the above, we will discuss some of the insurance policies that should be considered by anyone starting a business in Australia.

PUBLIC & PRODUCTS LIABILITY

Every business should have Public & Products Liability insurance. This policy will provide cover in the event you cause injury to another person (or someone suffers injury due to your negligence) or you cause damage to third party property, in the course of carrying out your business activities or from your products.

All businesses have an exposure to such claims, even if you are just working in an office.

The limits to be considered are usually $5m, $10m or $20m and the premium will be determined largely by your business activities & estimated annual turnover.

WORKERS COMPENSATION

Workers Compensation is a compulsory insurance for employers. It covers your business for costs that might follow a workplace related injury or disease. These costs may include weekly and lump sum payments, medical, hospital and rehabilitation expenses, and return to work costs.

However, sole traders and partnerships are not eligible for workers compensation. In saying that though, if a sole trader or a partnership were to employ people, a policy will be required for the employees.

PERSONAL ACCIDENT & ILLNESS

If you are a sole trader or partnership and you wish to be covered for loss of earnings in the event of an accident or illness, a personal accident &/or illness policy is for you. The policy will cover a percentage of your weekly personal earnings (not business income) for a pre-determined indemnity period, usually from 1 – 3 years only. You will also have an excess period applicable of 7 – 28 days which is the period after an accident or illness before benefits will commence.

There are also options to cover your fixed business expenses while you are not working and lump sum benefits in the event of extreme accident or illness.

BUSINESS PACKAGE

A business package insurance policy provides various sections of protection allowing you to customise the insurance appropriate for your business. Sections of cover include: Property Damage (covering contents, machinery &/or stock against perils such as fire, water, storm, accidental damage, impact, malicious damage, etc.); Business Interruption (covering your loss of profits in the event you cannot carry on the business due to a fire destroying your premises, for instance); Theft (covering theft of contents, machinery &/or stock); Glass Breakage; Public & Products Liability; Breakdown of Machinery & Electronic Equipment; General Property (covering loss or damage to portable property, anywhere in Australia); Employee Dishonesty (theft of money & perhaps other assets, by employees); Transit (covering loss or damage to your goods in transit) and Money (covering loss or damage to money in transit, on your premises, in your safe and in your home).

GENERAL PROPERTY

Explained a little above, a General Property policy will cover your portable property against loss or damage, anywhere in Australia. Such property may include: tools of trade, laptops, mobile phones, photographic equipment, 2-way radios, etc.

PROFESSIONAL INDEMNITY

If you are providing professional services, you will require a Professional Indemnity insurance policy. Such a policy covers civil liability arising from a breach of your professional services or from the conduct of your professional business. Professional services are usually those professions that require further study and include professions that provide advice, designs, audit, certification, consulting and the like.

Professional service providers may be: solicitors, accountants, insurance brokers, architects, consultants, training organisations, engineers, etc.

A Professional Indemnity insurance policy will cover claims of pure financial loss (as well as claims of personal injury & property damage, for most occupations) that will likely be excluded by your Public Liability insurance policy.

The above insurance policies represent what should be the major considerations for any new business in Australia. As mentioned earlier though, varying risks of different businesses mean further insurance policies may be required to fully cover all business exposure. Your business may have a need for Management Liability (directors & officers liability, employment practices liability, statutory liability, taxation audit, fidelity, etc.); Contract Works; Plant & Equipment; Commercial Motor; Cyber Liability; Errors & Omissions or others.

To ensure your business is properly protected from the unforeseen, speak with an insurance broker who will provide advice on your risk & exposure and recommend a tailored insurance program to protect you.

Good luck in starting your new business!