We all understand the risks involved in running a business, which is why it’s essential to have proper insurance coverage. When mitigating these risks, accountants in Sydney can provide invaluable guidance. They can help you navigate the various types of business insurance available, ensuring you receive the financial support you need in times of adversity. While every business has unique requirements, some commonly recommended types of business insurance include:
Workers’ compensation
If you have employees, this insurance is compulsory. Each state operates its own Workers’ Compensation Scheme, designed to protect employees in the event of an accident or sickness. For businesses located in NSW, more information can be found at www.workcover.nsw.gov.au.
Professional indemnity
These policies protect you from legal action against you if someone suffers a loss due to your professional advice. This type of insurance is often compulsory for practising members of professional associations.
Public liability
This insurance covers compensation and legal costs you may have to pay if you are found liable to someone because your business caused injury or death or damaged their property.
Product liability
Where your business sells goods or even carries out repairs to products, you may need to insure against claims where the goods have caused damage or injury to others.
Property insurance
Covers damage or loss to buildings, contents and stock (including in transit).
Theft and burglary
This policy covers your business against theft of or damage to equipment, stock and contents if someone illegally accesses your premises.
Motor vehicle insurance
Each state also operates its own Compulsory Third Party insurance scheme, so if your business operates one or more vehicles, you will be paying CTP insurance as the bare minimum for those vehicles. You should also consider third-party property damage, fire and theft, or comprehensive vehicle insurance to protect your vehicles fully.
Employee fraud or dishonesty
This provides cover against fraudulent or dishonest employee actions that directly result in the loss of money or goods.
Business interruption
This covers losses suffered when a business can’t trade due to loss or damage from a weather event, flood, fire or other interruptions.
Tax audit insurance
It helps to pay for accounting and legal fees that might be incurred where you are audited by the Australian Taxation Office or various state tax offices (e.g. the Office of State Revenue in NSW). This is more fully discussed in our Why do you Need Audit Insurance? article from our October 2014 newsletter.
Directors and officers’ insurance
This insurance covers company directors for losses incurred due to wrongful acts in their capacity as Directors or Officers. Depending on the policy, this might include civil and criminal actions brought against the Directors personally.
Cyber insurance
This new specialist insurance helps businesses prevent and safeguard against data breaches, computer hacking, employer error, etc. Expenses related to the management of the incident, remediation, legal costs and third-party damages are the typical expenses that may be covered.
Key man insurance
A key man policy is a life insurance policy taken out by an employer on the life of a key employee or business partner. It is designed to ease the financial loss when the insured dies or becomes permanently disabled.
Cross Insurance
If your business has multiple owners, it is necessary to consider what happens in the event of the death or permanent disability of one of the owners. A buy/sell agreement is usually entered between the business owners, documenting how the business will be transferred to the surviving owners and for what price.
For businesses of significant value, the ability of the continuing owners to quickly fund the purchase from the departing owner or their Estate is critical. Cross-insurance policies are life insurance policies that the stakeholders take out on one another’s lives to provide funding for this purchase.
Several ways buy/sell agreements and cross-insurance policies can be structured, so it’s essential to take competent legal and tax advice to ensure appropriate arrangements.
SUMMARY
Business insurance is complicated. It’s essential to take advice from qualified advisers and to review your requirements regularly.
The above types of insurance fall into two main categories:
- Risk insurance – which covers the critical man and cross-insurance areas
- Business insurance – the other insurances mentioned above
It would be best if you usually had an insurance adviser specialising in each area above to look after your needs.
If you’d like help, please contact us, and we’ll put you in touch with the right adviser for your needs.
*Correct as of October 2015
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
