What insurance do I need for my business?
Your business may need a number of different insurance policy types in order to have adequate protection in the event of damage or loss. The types of insurance policies you should consider will depend on many different variables, such as the industry you operate in, the size of your business, your location and your financial ability to wear some costs yourself.
What is Business Insurance?
Business Insurance is one of the most common types of insurance policy purchased by businesses. Business Insurance policies combine various covers and options, making them customisable for most business types.
What are the different sections normally included in a business insurance policy?
- Business Insurance policies vary between insurers. Some of the most common options are:
- Property Insurance: Covers your buildings, contents and stock for loss or damage.
- Business Interruption: Covers your business for loss of income if the business can’t operate due to damage.
- Theft: of contents or stock.
- Money: Loss or theft of money owned by the business.
- Glass: Damage to glass, external or internal.
- Public and Products Liability: Covers injury to other people or damage to property that you have caused.
- Employee Dishonesty: Theft from the business by employees.
- Machinery Breakdown: Breakdown of mechanical items (items with a motor).
- Electronic Breakdown: Breakdown of electronic and computer equipment.
- General Property: Protects property that you take away from the premises.
What cover options should I take and how much cover does my business need?
Every industry, and every business within each industry, has its’ own unique set of risks, which means a Business Insurance policy must be tailored to each individual business.
There are many different factors – from company size, to the number of workers you employ, the products you sell (and whether you manufacture them), any service you provide, and the assets the business owns – that will determine the specific cover a business will need to mitigate risk and to protect its’ financials.
Why is it important that I insure for the right amount?
The first reason is obvious in that it is to ensure that a business owner has sufficient funds to replace or repair any damaged items, so that they can continue to run their business and earn an income.
However, it is also important to insure for the full replacement / rebuild value as many Business Insurance policies will have “average” or “underinsurance” clauses. The average/underinsurance calculation in a policy is written as a protection for the insurer, to ensure all policy holders insure for the full and correct value, so that the insurer receives the correct premium for the risk.
The calculation is applied to cases where a policy holder has not insured for the full correct replacement value. This essentially means that a policy holder’s claim under the policy will be reduced by the amount they have underinsured for – which can mean a significantly lower payout.
What is the claims process for a business policy?
In the event of an insured loss or damage to a business, the business will first need to “make safe” any urgent and unsafe damages that could lead to further loss or injury, documenting any evidence of the loss along the way (e.g. photos).
The business will then typically lodge a claim. Your insurance broker will assist you in lodging the required paperwork and documentation and help to get your claim settled efficiently.
Depending on the size of the loss, an adjuster may be appointed to assess the damage and process the claim. The affected business will be asked to submit their evidence to support their claim (e.g. photos, repair or replacement quotes, repairer reports, and invoices) prior to the insurer offering any financial settlement of the claim.
The length of time the claim takes to be finalised depends upon the size and complexity of a claim.
What are additional benefits?
Additional benefits, as the name suggests, are benefits payable in addition to the insuring agreement. For an example, an additional benefit on a theft section might be an agreement to pay for replacement locks and keys. The insuring agreement is often to only replace the items that were stolen and / or damaged in the process.
What are exclusions?
There are two places where exclusions can be listed on a policy. They can be listed in a policy as policy exclusions and therefore applying to the whole policy, or more specific exclusions can be listed under each optional policy section.
An exclusion is a provision in the policy that reduces cover for some types of risk. Some common exclusions are:
- uninsurable risks such as war,
- risks that may be covered under other policies, such as glass cover, under the property section,
- risks that should be easily controlled and maintained by the policy holder, such as weather damage to items in the open air,
- risks that are neither accidental or unforeseen, in other words they occur naturally, such as wear and tear or maintenance issues,
- and often risks that are illegal.
Exclusions are there to protect the integrity of a policy premium pool and to help keep the cost of insurance affordable. If insurance were to cover all losses, even those that had 100% probability, then it would mean premiums payable would be more closely aligned to the actual cost of replacement (think of the cost of building insurance vs the cost of the actual building – materials, labour, etc.).
What should I do if things change in my business?
Businesses are not static and are constantly changing. They grow in terms of income, but also in terms of assets and staff numbers. The alternative is true too. Some business owners might even choose to downsize, especially if they are close to retirement.
It is therefore especially important to realise that Business Insurance policies should not be static either and should change as the business’ needs evolve, thus ensuring the policy provides the business with appropriate protection from their changing risks.
Changes to the details you have provided, to the cover options selected, and to the amounts insured are all changes that can normally be made at any time during the life of a policy. The changes are made via endorsements to existing policies and any premium change is pro-rated to the time left on the policy.
Does Business Insurance cover flood damage?
The answer is it depends on the policy. Some Business Insurance policies will outright exclude flood cover, some will provide flood cover if the policy holder requests it (and pays any additional premium applicable to this additional cover), and some will automatically cover flood.
The most common is the middle option – the option of insuring flood if selected. So as a business owner, it is important that you understand the needs and risks of your business – and request cover if you think it is required, or speak to your insurance broker. It is also important to understand the policy definition of ‘flood,’ as this is different to ‘storm damage’ which may be covered even if flood isn’t.
What is Business Interruption insurance?
When significant damage occurs to a business, the business may be out of operation for days, months and in some case, even years.
Your property insurance has got the repair and replacement covered, but what about all the income you’re losing while your business is unable to function?
The Business Interruption section of a Business Insurance policy is to cover the income of a business whilst it is unable to trade due to an insurable loss or damage at the property (e.g. fire).
This is an extremely important cover for all businesses, but unfortunately one that is not always understood or selected by business owners. This is the cover that will keep the business financially afloat while repairs are made until the time when sales and income are back to their pre-loss position. Many businesses unfortunately do not survive a significant event due to the absence of Business Interruption insurance.
How can we help?
Bruce Insurance specialise in insurance for Perth businesses. We can create custom policies tailored to meet the specific needs of your business. We have access to over 150 national and international insurers and as a business, we have been operating for more than 30 years. We do not only assist in the arranging and updating of a Business Insurance policy, but we can also assist in the lodgement and process of a claim. We are essentially your support team when it comes to all things Business Insurance.