How to insure your business: Protecting your operational capability and cash flow
Protecting the operational capability and cash flow of your business is one of the most important protections you have — for your business, your investment and the people that depend on it. Here are some of the key areas you might consider when purchasing business insurance.
Business insurance is a broad term for a large range of risks that can be insured against, and can be broken down into four broad categories — physical assets, people, financial and operational. Each of these has a number of factors to consider, which we explore below.
Physical assets
Physical assets are the visible or tangible parts of your business, and can be protected with a range of insurances. Some of these include:
Damage to property: Protection for items like your buildings, contents, inventory and stock from events such as fire, flood or water damage, storm and hail, impact and collision damage.
Theft: Covers your property within your premises in the event of theft, with policies available that cover theft without forcible entry.
General property: This covers loss or damage to mobile property such as when an accident occurs. Mobile property item includes tools, specialised equipment, and technology including mobile phones, tablets and laptops.
Plant or machinery breakdown: Protects against the costs associated with the unforeseen breakdown of your machinery and equipment.
Electronic equipment: This protects you against the costs associated with the unforeseen loss or damage to your computer assets including point of sales systems, data media, desktops and laptops on the premises.
People
This insurance protects you, your business and those who work within the business.
Workers’ compensation: All employers must have workers compensation insurance, which provides protection to workers as a result of a work related injury or illness. The cover is designed to provide eligible injured workers with benefits, medical expenses, rehabilitation costs, and loss of earnings. Each state and territory has its own scheme, which is administered in different ways.
Key person risk: If your business depends on one or two key staff, whether at the strategic level, a technical expert, a principal representative or the owner, then you can insure against increased costs to the business should that person become incapacitated and unable to work.
Operations
Insurance that assists you to maintain ongoing operations in the event of a loss including internal and external interruptions. Loss may also arise from the operation of the business such as a result of negligence. You may be legally liable for a loss suffered by others that interact with your business such as your customers and members of the public.
A) Financial risks:
Liability: Liability insurance doesn’t just provide protection if a customer or member of the public is injured on your property. Policies can include product liability which can protect you against a loss suffered to another person or business as a result of your products or services. Each business should undertake a comprehensive examination of their liability risks to identify areas where insurance might be appropriate.
Professional indemnity: Businesses that provide advice, including advice during the provision of their services, can protect themselves from costs including legal expenses and compensation as a result of legal action taken against them for loss or damage suffered by others acting on the advice provided.
Fraud: Protects the business against financial loss as a result of employee dishonesty and fraud such as theft of money or property. Additional cover can be arranged to protect against external crimes such as forgery and computer crime.
B) Operational
Business interruption: Businesses that experience a loss or insurance claim may also suffer a loss of income as a result of being unable to trade or having restricted trading. Cash flow can be impacted with reduced income while costs such as payroll continue. Business can protect their cash flow and profits with business interruption insurance. This is a complex product and you should speak with a professional insurance broker to ensure you are adequately protected.
Investigations: Business can be subject to an investigation or audit by numerous state, federal and industry regulators including the Australian Taxation Office (ATO). Insurance can cover the costs of these investigations including the cost associated with engaging professional services such as accountants.
Cyber: In today’s world, with any business large or small operating and trading online, cyber insurance has become critically important. There are a wide range of potential threats in this category — from having systems compromised and being locked out, to reputational damage by an aggressor taking control of a part of your business identity — so each business should undertake a special audit of their IT systems to identify areas of exposure.
The importance of getting it right
Protecting you, your business, your employees, your customers and your cash flow is complex and unique to you. Working with a professional risk and insurance adviser can help you identify areas where threats exist that you may not be aware of, and to ensure the insurance cover in place is appropriate for you and your business.
Making a claim against any of your business insurances can also be confusing and time consuming taking you away from your usual business operations and activity. A professional risk and insurance adviser can help you through the complicated claims process getting you back to business.
Speak to one of our experienced risk and insurance advisers to see how we can help tailor insurance cover that’s right for your business. Call 1300 242 136.
The information provided in this flyer is factual information only and not intended to be advice about which financial products are suitable for your circumstances. Before you make any decisions about whether to acquire an insurance product we recommend you obtain advice by contacting an AB Phillips risk adviser.