Business Insurance

Is your small business adequately covered, or are you running the huge risk of being uninsured?

Insurance is one of those tricky things to get right – especially if you’re running your own business, which is a time-consuming endeavor. That’s why it’s actually quite easy for things to ‘slip through the cracks – especially when it’s something you only generally need to think about once a year, like insurance.

It’s also very easy to fall into the trap of setting up an insurance policy, ticking the box that makes payments a set-and-forget affair, and then stuffing the policy document in the top drawer, never to see the light of day again.

We spoke with John Ripepi, General Manager of the leading business insurer, WFI, to get the good oil on how you can make sure you’re covered in the event of a crisis.

“Insurance is an essential part of running a business,” John says. “Not only are there some legal requirements for having particular kinds of insurance, but small business, in particular, may also have limited capital and cash flow risk being unable to recover if something goes wrong.”

The research
WFI recently undertook research into the small business sector, to find out how small businesses in Australia feel about insurance, and to gauge the levels of insurance they tend to purchase. The statistics were, in some cases, quite alarming – especially when we start to think about being under-insured.

“Underinsurance is the key issue which is mainly caused by a lack of awareness of the types of insurance that are required,” John Ripepi says.

In many instances, being under-insured is simply a case of not knowing what insurance products are available, or how they work. This leaves the business owner in a precarious position, should something go wrong and their current level of insurance doesn’t cover it.

You’re probably already familiar with the major types of insurance available to small businesses – but in an increasingly competitive market, insurance companies are busily coming up with all manner of different options, to provide a tailored insurance product that’s just right for the business you own.

The research from WFI found that there was a staggering lack of awareness for some of the most important insurance types for small businesses. For example, 38% of those surveyed had not heard of Business Interruption Insurance, 41% had not heard of Machinery and Electronic Breakdown Insurance and 29% had not heard of Tools of Trade insurance/General Property Insurance.

Worse still, of the 250 SME insurance decision-makers that were surveyed, WFI found that 77% have no Business Interruption Insurance, 56% have no Personal Accident Insurance, 39% have no Business Liability Insurance and a staggering 60% have no Burglary Insurance.

How do you fix it?
The easiest way to find out what kind of cover you should be looking for is to call a specialist business insurance provider and speak directly to a consultant, to get their advice on the package that will suit you best.

John Ripepi agrees, saying “Speak to a business insurance specialist face to face. Someone who will take the time to visit your business, understand what’s important to you and tailor an insurance package that’s right for your business”.

“Build a relationship with an insurance representative who will check in regularly to ensure your cover continues to meet your needs as your business and situation change,” John says.

By speaking directly with the insurance provider, and – importantly – being open and honest about your business while you’re talking to them, you will be making sure that the level of cover you’re receiving is in the sweet spot between being underinsured, and over-insured.

A business insurance specialist can help you find the best policy for your business and then tailor it to meet your specific needs – and while having a tailored policy will mean investing a bit more time and effort into the process of getting the policy in place, it’s a vital step towards making absolutely sure that you’ve got your business covered properly.

“Work directly with your insurer to tailor a product that’s right for your business. Your insurance representative can also help you to determine your sums insured which means you’re only paying for what you need,” John says. “A good insurer should also help you with risk mitigation, which can help you to reduce your claims frequency. Having a good claims history can help keep your premiums down, as can electing to pay a higher excess.”

What do you need?
Figuring out what kind of insurance you need can be a headache, especially if you go into the process unprepared. Knowing all about your business will help you to ascertain which products are best suited to you.

“Every business is different and the type of insurance a business needs will depend on a myriad of different factors,” John says. “Things like the number of staff employed; whether the business has a premises, is mobile or online; whether they produce or manufacture products, on-sell goods or provide a service; whether they have a fleet of vehicles, are just some of the many things that can influence the type of insurance required.”

John says that many businesses will need to have, as a legal minimum requirement Workers Compensation insurance and may be contractually required to have Legal Liability cover before they can perform work. But there are lots of different insurance products available, some of which can be absolute lifesavers if something goes wrong – especially for small business owners.

Review your policies
It’s one of the joys of small businesses that they are wonderfully flexible, adapting quickly to their customer’s needs and the wider Australian economy. They can grow rapidly too.

What often starts out as a mobile or home-based business can quickly grow into one that requires larger premises with more stock or equipment – and what happens then is that within the space of a year the business may have completely ‘outgrown’ the original insurance cover.

Even if a business has not changed its operations much, there will still be other aspects to consider, for example, increases in rebuilding costs and general inflation mean that the sum insured needs to be reconsidered.

Re-assessing your policy is one of those tasks that the typically time-poor small business owner will put off as a bit of a chore – but it’s actually a crucial part of making sure your business is in good shape, and able to weather the inevitable storms that occur.

A good rule of thumb is quite simply “new gear = new insurance”. That’s because, as any business grows, there will always be the need for investment in equipment upgrades, or even building improvements to your premises.

However, usually, the last thing on a business owner’s mind when they’re experiencing the thrill of expanding their business and buying new gear is the consideration that, should the unthinkable happen, would it all be covered under their current policy.

 At a glance:
John Ripepi’s business insurance basics

Legal Liability – insures you against your legal liability to pay compensation for personal injury or damage to property in connection with your business.

Workers Compensation – protects your business from financial costs when a worker sustains a work-related injury or disease

Business interruption – insures you against loss of gross profit due to a reduction in turnover as a consequence of interruption to your business.

Burglary and theft – insurance against the physical loss of or physical damage to stock and other property caused by either burglary or theft.

General property – insurance for accidental loss of, accidental damage to, and theft of general property or stock that’s not at your business premises. For example, if it’s in a vehicle.

Business property damage – insures your business property, including buildings, vehicles, and stock, against physical loss and damage directly caused by a number of different events. These events include accident, fire, lightning, earthquake, escape of liquid, damage directly caused by a burglar or thief, and vandalism.

“This is by no means an exhaustive list, again it will depend on the client’s situation,” John says. “Speaking to a business insurance specialist who can offer you a tailored solution, can assist you in choosing the right insurance for your business.”

A Quick Q&A with Vero Insurance

We spoke with the team at Vero insurance to get their take on what makes small business insurance tick. Here’s what they had to say…

How important is it for Small Business (SMB) owners to keep up to date with their insurance?
Business Insurance is a lifeline that can either protect and sustain your business through a range of changing conditions or if ignored, can leave you floundering and struggling to survive. Keeping business insurance up to date is absolutely critical.

How common is it for SMB owners to ‘set and forget’ their insurance policies?
It is all too easy for business owners to set and forget about their insurance policies because they are totally focused on servicing, growing, and improving their business offerings. For their brokers, that is both an opportunity and a duty. Reminding the business owners of the need to reflect changes in their business with adjustments to their insurance policies is critical for a trusted adviser.

What are the pitfalls of not keeping SMB insurance policies as up-to-date as possible? Quite simply, if you don’t keep policies up to date, you create a ‘risk gap’. It means that the business has more (or less) at stake than it is covered for. That will, unfortunately, be revealed when the business owner needs to make a claim.

Briefly describe the problems of not being correctly ‘insured’.
Small businesses are dynamic. Their circumstances often change and sometimes, dramatically. That is why it is so important for small business owners to remain vigilant when it comes to their insurance needs.

Have their staff numbers changed? Have they purchased new equipment? Has a new client brought an increase in their turnover? Have they moved premises?

All of these questions can impact whether the business is over-insured or under-insured.

What tips or hints do you have that can help SMB owners keep their insurance up to date?
Listen to your insurance broker. It is in both their and your interest to make sure they conduct regular ‘health checks’ on your company’s range of insurance needs. They can also offer you the protection you wouldn’t know you needed until an unexpected disaster strikes. Business Interruption insurance is a great example.

Why is choosing the right insurance company crucial for small business owners?
They want financial strength, experience, and ‘smart’ business awareness to be major advantages in the insurer they select. Vero for example has been operating in Australia for over 150 years, has the backing of the Suncorp Group behind it, and is widely respected as the smart business insurer. They protect your business’s success.

What are some ‘red flags’ that SMB owners should be aware of when buying insurance policies?
Your broker can explain any intricacies involved in the insurance they recommend. If however, you choose to buy your insurances without the assistance of a broker, you will be required to do a lot of homework and read a lot of details!

Always choose a reputable insurer whose name you know and measure your insurance policies carefully against your businesses’ needs, both current and future. Good luck!