Choosing the right insurance cover is an important part of managing your business, as it helps you manage and reduce potential risks.
Being uninsured or underinsured is risky, as it exposes you to potential losses if something goes wrong in your business. Equally, having the wrong kind of insurance can be a waste of money. You should regularly review and update your insurance, especially when your business grows or changes.
While some decisions regarding insurance have already been made for you (such as those required by law, customers, clients or other businesses), it is your responsibility to identify risks in your business and decide which ones to insure against.
This guide will help you to understand your business insurance needs.
Taking out comprehensive insurance is one of the most important ways you can reduce business risk. Insurance reduces risk by transferring it to the company that issues the policy. You pay an insurance premium rather than risk the possibility of a much larger loss.
Some decisions regarding insurance have already been made for you, such as:
It is your responsibility to identify risks in your business and decide which ones to insure against.
As a business owner you should be aware of all of the potential risks to your business. Look closely at your business operations to identify all potential risks. These could include:
Once you have identified and evaluated possible risks, prepare a risk management plan. This will help you decide which risks you absolutely must insure against and which ones you can protect yourself against in other ways, such as deciding not to sell a particular product because it is likely to injure clients.
The types of policies commonly included in business insurance are outlined below. Your business may only need a selection of these. However, insurance requirements vary considerably and, if your business is in a specialist industry, you could need others that are not listed. It is vital that you talk with a number of insurance companies or insurance brokers to find the most appropriate insurance for your business.
Compulsory insurance usually has to be taken out separately to business insurance.
All employers must have workers' compensation insurance.
For advice on workers' compensation insurance, contact Work Cover Queensland.
All motor vehicles must have CTP insurance, which covers personal injury to third parties in an accident. It does not cover damage to your vehicle or any vehicle that you damage.
Getting the right insurance for your business can be tricky. Make sure you consider all your options. Always ask for the policy in writing and make sure you read and understand the full terms and conditions in the policy disclosure statement. Consult an insurance broker for more advice.
Some industries require other compulsory insurance. For example, to provide a warranty on home construction, it is a legal requirement that a construction company organises Queensland Building and Construction Commission (QBCC) home warranty insurance for the home owner.
Professional indemnity insurance protects you from claims made against you relating to the provision of professional advice or services.
You may need professional indemnity insurance if you provide services involving the use of some special skill or ability - for example, if you provide your clients with advice on:
If you provide this type of service, you are required by law to meet a particular level or standard expected of your profession. You can be held liable if loss or damage occurs as a consequence of your not meeting that standard.
For example, an architect with professional indemnity insurance would be covered if they were held liable for architectural advice they provided that caused someone injury or loss.
Professional indemnity insurance can cover you, up to the limit of the cover, for:
Consider the risk to your business if something was to happen to you personally. You may require some of the following common types of personal insurance as well as business insurance:
Sections of insurance policies that relate to replacement and asset valuation are often misunderstood.
A replacement policy aims to replace or restore property as new. These policies may have an upper limit on the amount payable and, if you are not aware of this, you could be insured for less than you think. Similarly, if you're not sure of the replacement costs of your assets at today's prices, you may also be underinsured.
The different definitions for flood and inundation in insurance policies often cause confusion.
Most insurance policies do not cover damage to a property if caused by:
Speak to your insurer to find out if you have the right insurance cover for your business.
Benchmark your business to compare insurance costs in similar businesses.
Good advice before you purchase insurance will help you get the right insurance for your business and save you money. An insurance broker can organise the purchase of insurance for you, or you can purchase directly through an insurance company.
An insurance broker can provide the best advice on insurance for your business. They can help you decide which types of insurance you need and put together a cost-effective package. Insurance brokers do not work for a particular insurance company. By law, an insurance broker must represent your interests.
If you already have insurance, you can seek advice from your insurance company, but they will be limited to the specific types of insurance they offer and may be motivated to sell you more than you need.
Remember to regularly review your insurance cover with your insurance company or broker.
Contact the Financial Ombudsman Service to dispute a claim.
Learn more about resolving disputes with other businesses.
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