Have you reviewed your small business insurances lately?
Insurances are an accepted part of doing business, but many small companies in Australia are essentially putting their businesses at risk, simply because they don’t have the right type of insurances.
If you are a small business owner, then you are most probably aware that ‘off-the-shelf’ insurance policies don’t always suit your business’s needs. In fact, most small business insurance policies need to be expertly crafted to suit the individual needs of each business.
This means that the insurance landscape is fast becoming a very customised environment, where the same type of policy can look entirely different, depending on each company’s requirements. The problem is that many small business owners don’t have the time to spend sorting through their insurance policies, an omission that can jeopardise the health of their company, simply because they don’t have the right insurance policies in place when disaster happens.
So if you are a small business owner, here are four steps to make sure that your business has all of the insurance cover it needs.
Step 1: Review and update your insurance policies
It goes without saying that you should evaluate your insurance policies every year. All businesses should have cover for the loss of their building, stock inventory and contents, but is the dollar payout still enough?
The cost of doing business seems to increase every year, so it is makes sense that your insurance cover increases accordingly. After all, if for some reason you lose all of your stock, which is valued at $150,000, but you are only covered for $125,000, it doesn’t take a genius to realise that you are $25,000 out of pocket.
Step 2: Do you have business interruption insurance?
Most insurance policies cover loss or damage to your inventory, building and its contents, but unless you have the right type of insurance, you can’t claim for losses incurred simply because your business was unable to operate.
For example, your business might suffer from missed sales, because your store was inundated in a flood, taking at least a week to clean away all of the mud, fix the water damage and have new stock delivered. It can take even longer for sales to slowly return to normal.
In this instance, subject to having the optional flood cover in place on your policy, all of these losses would be covered by your regular insurance policies, except for your lost sales – unless you have business interruption cover.
You might be surprised to learn that most businesses don’t have this type of insurance, which is no comfort when your business is unable to operate for 3 months, due to the smoke and water damage caused by a fire in the building next door.
Step 3: Evaluate the limits of your public & products liability cover
Whilst any sensible small business owner will have public and products liability cover, the great majority only have the basic minimum cover. This minimum cover might be fine for a while, but as we all know, a public liability claim can reach into millions of dollars, particularly when it is a personal injury claim.
With a million dollar shortfall between your insurance payout and the aggrieved person’s compensation, your business could not only suffer a significant loss, but could be forced to close its doors. All of this means that you need to re-evaluate your level of public and products liability cover.
STEP 4: Do you have cyber insurance?
With the upcoming legislation requiring certain business to report all cyber-attacks and data breaches to the Australian Privacy and Information Commissioner, cyber-insurance is fast becoming another essential type of cover for most Australian businesses. You can find out more about whether your business is included in this new legislation, which comes into force in 2018, on the Australian Law Reform Commission Website.
Essentially however, even something as popular as offering your customers free WIFI in your store can result in a loss of customer’s personal data via a cyber-attack. So this is not something that small business owners in Australia can safely ignore for much longer.
Take home insurance messages
In general, most small Australian businesses don’t have the right type of insurance policies and even if they have the right policies, they don’t have enough cover. Insufficient insurance cover can result in massive financial turmoil and even bankruptcy for many small businesses, a situation that can be prevented or at least, minimised, by reviewing and updating your insurance cover annually.
Lewis Insurance Services is here to help our clients with advice on the appropriate insurance protection for their personal and business needs. To discuss further, please contact Lewis Insurance Services on 07 3217 9015 or send us an email at firstname.lastname@example.org .
This article was published by our AFSL Licensee, Insurance Advisernet Australia P/L (03/08/2017)
This information and any accompanying material does not consider your personal circumstances as it is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances and considering the Product Disclosure Statement.