From an evolving business to policy limits, here are the top considerations when auditing your business insurance.
No matter what industry you work in, the size of your small business, or whether you’re product- or service-based, every owner faces a range of broad and specific risks that could impact their business. It’s important to know what risks your business faces day to day and to use tools like insurance to help you mitigate those risks.
Business insurance acts as a safety net to protect your and your business if an accident or incident occurs. It’s important to consider a range of factors to ensure you’ve got the most comprehensive and well-suited cover for your business’ needs. While working on your list of never-ending things to do, it is business-critical to set aside the time you need to review your current business insurance. Some great times to do this include at renewal time, as your business grows, or as your products and services change.
Here are the top five things small-business owners should consider when reviewing their business insurance:
1. Has your business changed in the past year? Consider updating your policies and check for inclusions or exclusions.
Business insurance is not a one-size-fits-all solution. Depending on your small business, you may need multiple policies to help protect the risks you are most concerned about mitigating. If you provide goods and services, having public and product liability insurance may be a start; however, if your business involves providing advice to clients and customers, then you should look into professional indemnity insurance, too.
As your business changes, it’s important to reassess the cover you have to ensure it’s still relevant, or to add additional cover if it’s needed. For example, if your business grows to the point of having a management team and employees, management liability insurance may be something you need to consider. Here are some prompts to help you assess any changes to your business: Have you grown in revenue or employees? Have any of your business activities changed? Do you, or your staff members, use a car for work purposes? Do you have new equipment that needs to be covered? Have you moved office or shop locations?
Any changes like the above can affect your existing insurance or may mean you need another policy and you should be updated as soon as possible to ensure you’re appropriately covered.
2. Doing something new, such as Telehealth, online sales or operating your business from home?
With life post COVID-19, there have never been more businesses providing such a broad range of services – from providing telehealth services while you holiday overseas, to starting your own online shop, importing some new products or starting to operate your business from home. These all may or may not be covered by your existing insurance. It always makes sense to ask specific questions and ensure your cover is adequate for all your business needs.
This may mean you need to shop around. With new types and ways of operating, it can take a few days or a week or two to sort this out.
3. Does your business have exposure to a possible cyber event?
We’ve all heard about the large-scale cyber breaches that have happened over the past year in Australia, but did you know that small business is the target of 43 per cent of all cyber crime in Australia? And it’s estimated Australian businesses lose approximately $300 million a year to cyber crime. Most small and medium-sized businesses (almost nine out of 10) estimate that they will recover from a cyber incident ‘immediately’ or ‘within a few days’, regardless of whether they had previously experienced a cyber incident. But reports to the ACSC show that businesses commonly underestimate their cyber incident recovery period.
It’s important for small-business owners to know that many businesses only partially recover from cyber incidents, permanently losing critical data or finances, which can be devastating.
There are a number of ways small-business owners can limit the potential impact of these crimes – cyber.gov.au is a great place to start. Cyber insurance policies can help to protect your business financially if a cyber crime happens. They can cover the costs of a cyber event and provide the response, as many insurance companies have 24/7 cyber incident response teams. This cover can also protect your business from losses if a customer or supplier makes a claim against you for a cyber event that caused them loss or damage.
4. Comparing cover and pricing – where to start?
When it comes to business insurance, a cheaper insurance product isn’t necessarily what’s best for your business. But that’s not to say it’s definitely not the best either!
When comparing prices between companies and products, the most important thing to keep in mind is that the product is what you are required to take out, plus the limits you get. Secondly, it’s always worth considering if the activities described as our occupation or business by the policy match what you are doing. If you aren’t sure, it may be best to pick up the phone and speak with an insurance company representative, or a broker.
5. Do policy limits match your needs?
Policy limits are the maximum amounts the insurance policy will pay out for covered losses or claims. Why are these important? If your policy limit is too low, you might not have appropriate cover in the event of a claim, which could lead to out-of-pocket expenses your business may need to pick up. And if policy limits are far too high, you may be paying more than you need to for your cover.
To best assess what policy limits you need, think about the risks your business faces. What is the worst-case scenario that could take place? How much would that set you back financially? You can sometimes negotiate for a third party to cover this cost, or ask your client to reduce a limit that you might be asked to take out. This can help ensure the cover remains cost effective for you and your business.
At the end of the day, your small business is your livelihood, and no one can be better placed to make the right decisions about what you need to protect and what cover you need. You’ve worked hard to get it to where it is now. But be prepared. Just one small incident or accident can sometimes cause huge damage.
Information provided is general advice only and has been prepared without taking into account any person’s particular objectives, financial situation or needs.
This story first appeared in issue 41 of the Inside Small Business quarterly magazine
