Business insurance

Business insurance is a critical part of your business continuity approach. It helps to manage risk and protect you and your business from loss.

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Importance of insurance

Without adequate insurance, your business may face significant consequences. This may mean you have to close your business, or pay large amounts of money.

If a customer or staff member is injured, you may be taken to court and have to pay significant damages. This is where being insured is valuable.

Types of insurance

There are different types of insurance for your business. Generally, insurance can be either compulsory or non‑compulsory.

Compulsory insurance includes:

  • workers' compensation
  • product and public liabilities
  • third party personal injury insurance (for vehicles)
  • industry-specific insurance.

Non-compulsory insurance typically includes common types of business insurance such as:

  • professional indemnity
  • property damage
  • burglary and theft
  • natural disasters.

Compulsory business insurance

Workers' compensation is a compulsory insurance payment to employees if they are injured at work or become sick due to their work.

It is also available to your workers if they are injured in an accident on the way to or from work, or during their lunch break.

Workers' compensation includes payments to employees to cover their:

  • wages while they are not fit for work
  • medical expenses and rehabilitation.

Employers must take out workers compensation insurance to cover themselves and their employees.

Contractors and sub-contractors are usually considered workers when they are engaged to perform work on behalf of a business.

Read more about workers' compensation.

Case study: workers' compensation for contractors

You engage a contractor who is a sole trader with their own Australian business number (ABN) to remove viruses and malware from your clients' computers.

The contractor trips in your workplace and is injured. They would be able to claim from workers' compensation as they were working on behalf of your business.

Product and public liability insurance covers your potential liabilities to third parties for personal injury or damage to property. The difference is that product liability relates to injury or damage caused by any products you distribute, supply or manufacture and public liability relates to injury or property damage whilst you’re on the job.

All cars and motorbikes must have CTP insurance, whether it is for business or personal use.

You can select your insurer when you register your vehicle, or remain with the insurer on the registration documentation.

Compare insurers at the Queensland's Motor Accident Insurance Commission.

Industry-specific compulsory insurance

You may need other compulsory insurance depending on your industry or sector. This may include public liability insurance and home warranty insurance.

Talk to a business insurance broker or business adviser to find what specific insurance you need.

Read more about working with business advisers.

Find an insurance broker

To find a business insurance broker visit:

Common types of business insurance

The types of insurance and level of cover you need will vary according to your business activities. This list explores common types of insurance.

Product liability insurance covers your potential liability if your product causes harm, loss or damage because it was not correctly manufactured or installed.

Example: your customer suffers an electrical shock after buying a faulty toaster from you.

By law, an insurance broker must represent your interests. Insurance brokers do not work for a particular insurance company and can give you technical advice that can be very useful if you need to make a claim.

Public liability insurance covers your potential liabilities to third parties for personal injury or damage to property if you are negligent.

Example: when showing a customer through your kitchen manufacturing premises, they are injured by sharp edges on your machinery.

Professional indemnity insurance covers negligent acts, errors and omissions when you provide professional advice or services.

Example: your financial service business has provided advice that leads to your client losing money. They purchased stocks and shares on your advice, and your advice was 'faulty'.

Professional indemnity insurance can cover you, up to the limit of the cover, for:

  • your legal defence costs
  • the third party's legal costs
  • any court awards made against you.

Directors' and officers' liability insurance protects company directors and board members.

Company directors and board members are expected to act in good faith. This insurance does not cover fraudulent or other deceptive conduct.

To prevent risk the Australian Securities and Investment Commission (ASIC) sets out key responsibilities of company directors.

Business interruption insurance can cover costs if your business is out of action due to certain events or risks. This may include the costs of:

  • rebuilding your premises
  • finding and outfitting new premises
  • staff.

Example: your restaurant is interrupted when a fire starts in your commercial kitchen. You must close for a few months for repairs and refurbishment.

You may need to select an 'indemnity period', which is the period of time you want to cover your business for loss of gross profit.

Property damage insurance covers damage to your business property from fire, storms or explosions, including your buildings, contents and stock.

Example: your winery building is damaged by a cyclone, which ruins the roof and walls, and all wine bottles are destroyed.

Note: This type of insurance does not cover floods.

Glass and sign insurance covers loss of, or damage to, glass windows, signs, and showcases at your business premises.

Example: your business storefront is damaged by stones thrown up by a passing truck.

Burglary and theft insurance covers losses in the event of a robbery on your business premises.

It may cover:

  • temporary protection of your premises
  • personal property of your employees
  • external fixtures and fittings attached to the premises
  • replacement or modification of locks in the event of stolen keys
  • replacing or restoring your business records.

Tax probe or tax audit insurance covers the professional and accountant's fees you incur if your business's financial or tax affairs are audited by the Australian Taxation Office (ATO) or other agency.

Example: the ATO audits your business and you need to engage an accountant and auditor to work through your records and provide a report.

Money insurance covers cash in transit, on business premises and in personal custody.

It covers any losses including from the auto teller to the opening of the bank the following day.

It does not cover money loss caused by your negligence such as:

  • clerical or accounting errors
  • if a vehicle is stolen while left unattended
  • if keys to money storage areas are not kept in a safe.

Example: you take the cash from your till to the bank after business closes for the day. On the way to the bank, your banking bag is stolen.

Fidelity guarantee insurance covers fraud or dishonesty committed by employees.

Example: your business has a manager that dishonestly changes the payment details on your business invoices to their personal BSB and account number. Money from customers is sent to the manager's personal bank accounts.

Electronic breakdown insurance provides specialised cover for computers and machinery.

Example: your factory experiences a major equipment breakdown caused by an internal fault. Your equipment has been serviced regularly, so this internal fault is unexpected.

This insurance will cover the repair or replacement of the equipment.

General property insurance covers items including tools, equipment, mobile phones or stock samples. This replacement policy aims to replace or restore property as new.

These policies may have an upper limit on the amount payable. Make sure you're aware of the current costs of your property, so that you're insured for an appropriate amount.

Marine, cargo, and transit insurance covers goods in transit and the supply chain.

Example: your commercial boat and cargo are lost at sea.

This type of insurance covers vessels and cargo across Australia and internationally, and includes a range of insurances to cover door-to-door deliveries across all types of transport (e.g. road, ships, train).

Employment practices liability insurance covers damages and costs resulting from situations such as discrimination, unfair dismissal, bullying, and harassment.

Example: your staff member claims a manager has been harassing and bullying them and then unfairly dismissed them.

Read more about preventing these risks in the Small business handbook (PDF, 2.1MB) from the Queensland Human Rights Commission.

Natural disaster insurance covers events such as floods, bushfires and cyclones.

Example: your business is impacted by a biosecurity issue beyond your control and your livestock must be destroyed.

Find more natural disaster insurance resources from Get Ready Queensland.

Certificate of currency

A potential customer may request a certificate of currency to prove that you have the required insurance cover. This is typical in a business-to-business sales scenario, such as a tender.

A certificate of currency confirms:

  • the business entity that is covered by the insurance product
  • the type or scope of the insurance cover
  • that the policy is active and valid on a particular date.

A customer may request a certificate of currency from you to confirm that insurance policies have not been cancelled or lapsed—which may occur where premiums can be paid monthly.

It can be requested in addition, or as an alternative, to an insurance policy certificate.

Your insurance broker or provider can issue a certificate of currency. This is a standard request that can usually be provided to you immediately via email.

Plan where you need insurance

Look for risks in your business to understand where you might need insurance. Identifying and planning for risks forms part of your business continuity planning.

Thumbnail of business continuity planning Word template

Business continuity plan template

Use the risk management plan section of the business continuity plan template to:

  • find risks in your business
  • work out where you might need insurance.

Download the business continuity planning template.

Insurance claim risks

When you make a claim on your business insurance, consider that it may not always be successful. Ensure you work with your business insurance brokers and advisers to understand what you are and aren't covered for with each level of cover and insurance package.

If the insurance is covered by other companies such as your suppliers, you may be unsuccessful in your claim and need to get reimbursement via their insurance. For example, if machinery has malfunctioned and caused damage to your business, you may receive reimbursement from the insurance company of the machinery's manufacturer.

Inundation risk

Most insurance policies do not cover damage to a property if caused by:

  • inundation of water flowing from a natural watercourse
  • inundation of water from both the storm and overflow of a natural watercourse (unless most of the damage is caused by stormwater)
  • other phenomena, such as earth movement, even though this may itself have been caused by inundation of water from a storm.

Flood insurance

Carefully investigate the details of your flood insurance policy to make sure you are adequately covered.

The scope of the policy may cover your business flooding from a burst pipe, however it may not cover your business if the flood is caused by a river.

Underinsurance

Claims may be unsuccessful if you are insufficiently insured. Make sure you're adequately covered as part of your risk management processes.

Read more about identifying and managing business risk.

Claiming against different insurance types

Claims can only be made on the right type of insurance. For example, electrical breakdown insurance would not cover maintenance issues, theft, or damage covered under building insurance. Make sure you clearly understand what you're covered for under different types of insurance, and make sure you're adequately covered.

Disputing a denied claim

Access free, independent dispute resolution for insurance complaints from the Australian Financial Complaints Authority.

Insurance for home-based businesses

When running a home-based business, consider that your general home and contents insurance may not cover your business operations.

You may be covered by your home and contents insurance in some cases, such as if your business is taking up less than 20% of your home, and customers or suppliers are not visiting the premises.

Check your home and contents insurance policy for disclosures which require you to declare if any business activity is taking place on your property.

Other types of business insurance may still apply to home-based businesses, including:

  • public liability insurance – covers the risks of customers or suppliers getting injured while visiting your business. Public liability may also cover you if you damage their property.
  • business continuity insurance – covers your records and business-related activities if your home is robbed.
  • additional property insurance – covers mobile business equipment used outside the home and on business trips.
  • machinery breakdown insurance – covers breakdowns in business equipment and machinery used at home.
  • money insurance – covers loss of cash in a burglary or fire, or theft on the way to or from the bank.

Personal insurance for business owners

As a small business owner, it is important to also protect yourself. Options for personal protection include:

  • life insurance
  • trauma insurance if you are unable to work through a serious illness or injury
  • income protection if you are unable to work for a period of time due to illness
  • business expenses—which insures sole traders or small partnerships for expenses such as leases and wages while they are unable to work due to illness or injury.

Assess your situation and prepare your business based on the following questions:

  • What would happen personally if you could not continue to work for a period of time?
  • What would happen to your business if you could not work?
  • What business liabilities would you continue to have if you could not work?

Also consider...