Four key insurance questions
Some things to consider when shopping for your insurance policies:
1. Why do I need insurance?
For your business to operate legally, some basic insurances are mandatory — workers’ compensation insurance for staff and third-party policies for any work vehicles.
In some instances, public liability insurance and professional indemnity may not be just advisable but compulsory.
Questions about public liability are among the most commonly searched insurance queries, according to Google, so it pays to get advice from a professional.
Small businesses often run on tight margins and loss or damage when you are uninsured can shut you down.
2. How much should I insure my business for?
Your cover needs to reflect true replacement costs and any clean-up costs associated with the claim.
Don’t forget to include usual stock levels, equipment and buildings. There are contents/asset calculators available online to guide you through the process, or you may have a broker on the case.
It is essential to review and adjust your cover on a regular basis to ensure it fits your size, activities and risks.
Insurance can often be neglected during busy periods. But any time your business changes (for example, new staff, equipment or premises) is a key time to review your coverage.
3. Should I use a broker?
Most SMEs tend not to use a broker when making their insurance purchases, according to an annual index.
The Vero Insurance 2018 SME Insurance Index showed that 37 per cent of SMEs used a broker for their last insurance purchase, up from 34 per cent the previous year.
SMEs say they are using brokers less for the following reasons: it is easy to get insurance themselves (56 per cent), cheaper (45 per cent), can’t see the benefit of a broker or received poor service (39 per cent) and prefer online (34 per cent).
For those who find insurance confusing to navigate, a broker can advise you on the policies and level of cover you need.
Another reason some SMEs prefer to use a broker is that they handle any claims you make and help with renewals, relieving the administrative burden on small business.
A broker should talk you through any fine print. Understanding what is NOT covered is just as important as knowing what is.
4. How can I save money?
You can save money on insurance policies simply by shopping around. But beyond this, you can tweak your coverage by reviewing options on your policies to ensure they offer value for money.
In some situations, you may want to consider increasing your excess to drop your premiums.
And it never hurts to just ask for a discount, particularly if you are renewing a longstanding policy. Some insurers base their business premiums on staff numbers while others use revenue as a base.
If you have low staff and high revenue, choose accordingly. It is not advisable to ‘save’ by under-insuring.
Australian insurers WFI commissioned a survey of 250 small businesses in Sydney in 2015 and found an alarming 77 per cent had no business interruption insurance, while 60 per cent had no burglary insurance.
Nearly 40 per cent did not carry business liability insurance.