Do I need business insurance? A common question that is asked. Small business owners face many challenges when starting up. Finding and fitting out a suitable location, recruiting staff, financing, and dealing with legal contracts are just a few. But surprisingly insurance is not often something that is front of mind for those starting a new business.
Do I Need Business Insurance?
Often the process of implementing insurance is triggered by third parties such as a landlord or a customer who require evidence that your business is properly insured before they will start trading with you. The process is usually rushed with little thought going into risk exposures or insurance requirements. Not an ideal way to go about implementing effective protection for your business.
The nature of your business activities and its exposures will often dictate the types of insurances applicable for you. Your appetite for risk and willingness to invest in risk management will also play a significant role in what insurances you choose to acquire for your business. Generally speaking however, there are a few insurances policies which are usually appropriate for most businesses whatever their industry.
Obviously physical assets like buildings, cars, tools and equipment are seen as most valuable and most worthy of protection from fire and other perils. But small business owners should also be aware of other intangible threats that can lead to legal liability and be even more detrimental to a business.
Management Liability Insurance
As a director of your company, you are legally responsible to ensure you fulfil your company management obligations. You need to provide a safe work environment, trade fairly, and uphold your fiduciary duties. Breaches of contracts and shareholder disputes are other examples of where you as a company director can be held legally liable.
There are also legal requirements attached to how your company manages its employment practices. Bullying, harassment, discrimination and unfair dismissal claims by employees are not uncommon and can result in lengthy and costly litigation.
Failure to meet your company statutory obligations can result in hefty fines and penalties from government regulatory bodies. Occupational health and safety breaches and failure of a businesses to meet workers compensation requirements are areas often scrutinised by government agencies.
Company tax and workplace audits by regulators are also on the rise which can result in lost productivity, additional wages and unexpected accounting costs.
Workplace crime such as employee and contractor theft and fraud are also becoming more prevalent in business
A Management Liability insurance policy is designed to protect companies, directors and employees from the legal costs and financial losses posed by these scenarios. And since directors and employees can be found personally liable (exposing personal wealth and assets), Management Liability insurance should be an important consideration for all business owners.
Public Liability Insurance
In carrying out day to day business activities, any businesses can be responsible for causing damage or personal injury to another party. And the costs associated with these mishaps can be significant. That’s why Public Liability insurance is something many of your customers and suppliers will require you to have.
But when seeking Public Liability insurance, small business owners should not buy on price alone. By doing so you could unwittingly be jeopardising your businesses’ protection. It is not unusual for certain Public Liability insurance policies to restrict or exclude cover for:
- certain activities that your business could engage in;
- work performed by contractors that you may use;
- products that you have imported; or
- losses associated with electronic data.
Professional Indemnity Insurance
In days gone by, it was only the traditional professions such as accountants, lawyers and doctors who insured themselves with professional indemnity insurance. But now we are increasingly seeing legal action being taken across all kinds of occupations because of financial losses that people or businesses have suffered.
Professional Indemnity insurance can protect small business owners from legal liability stemming from advice you have provided and from errors or the performance of services you have provided.
A business can face excessive legal costs defending themselves against litigation – even if they are not at fault. Consequently, Professional Indemnity insurance has become a more pertinent insurance for small business owners a and something that they should weigh up as part of their selected insurances.
Acquiring appropriate business insurance that will respond as you expect requires careful consideration and consultation. An experienced insurance broker / adviser will take the time to understand your business and help you understand its exposures. They can help you make an informed decision on the risk you are prepared to absorb or what kind of the business protection you can implement be it through risk management strategies or insurance.
We often get asked the question “do I need business insurance” for an array of different types of business in different industry sectors, and we discuss all of the above with the client to ensure they have a detailed understanding of what the risks are and what they should be insured for.