There are many essential aspects of setting up and running a business. Admittedly, it’s not easy and while prioritising is a worthwhile strategy to overcome the pressure, leaving some aspects on the back burner can prove to be a big mistake. Unfortunately, getting adequate business insurance is one element that is commonly pushed aside and forgotten about.
In 2005, the Australian Securities and Investments Commission (ASIC) found that about 16% of small and medium-sized businesses (SMEs) had not insured their properties and, if they had, the property has been significantly unvalued.
Three years later, the Insurance Council of Australia (ICA) commissioned research into the reasons for such high instances of non-insurance amongst SMEs in Australia, and learned several facts, including:
- 26% of all SMEs do not have any form of general insurance
- 40% of sole traders operate their business with no general insurance
- 80% of SMEs inadequately insured cited the premium cost as the chief barrier
The ICA discovered that, as with so much to do with insurance, urban myths and lack of accurate information contrived to misinform business owners and leave them vulnerable to the consequences of mishap, accidents and mistakes.
But what are the myths that people are accepting as true? Here are 7 of the most common that we are happy to debunk.
7 Myths SMEs Should Ignore
- Sole traders need no workers compensation insurance – Admittedly, this is a complex issue. According to national WorkCover legislation, if you are a sole trader, proprietor or a member of a partnership, you are not a worker in your own business and, therefore, are not entitled to take out workers’ compensation insurance (personal accident and illness insurance can cover you). However, if you hire a worker (even casually), then you will need to get coverage for that employee. If you are a working director in your own company (actually do work on site), then you will also need to be covered. Our advice is to talk to an insurance broker to be sure of your position. And check out ACT’s Worksafe website for details.
- Home-based enterprises don’t need business insurance – It might seem like a sensible assumption, but in fact, business activities are not covered by home insurance. So, if your computer short circuits in your home office, you’re probably not going to get a payout with which to buy a replacement. And of course, if you are outside the home, at a meeting in a local café for example, and you drop a laptop on your client’s foot, then you are certainly not covered. With a properly structured home business insurance policy you can be.
- No business auto insurance on your personal car – There is a difference between using a car for personal use and using it for business or work use, and this is a distinction that most insurance policies make. Basically, personal auto insurance policies exclude coverage for business (commercial) use. So, if you own a home-based catering company and have an accident when delivering platters of sandwiches to a client, chances are your claim will not be accepted. If you use your car mostly for business purposes, then you should get commercial coverage.
- Umbrella liability covers everything – Umbrella insurance will not cover everything. Yes, it is designed to protect your business should the coverage required run far in excess of the actual coverage you have, and brings together several insurance policies in order to achieve that. But umbrella policies also have their limitations and exclusions. Read over your contract to determine what is and is not covered. Be sure to read the small print before signing anything, and consult an insurance broker to make sure you know all the facts.
- New client, new policy – Just because you have secured a new contract does not mean you have to get a new insurance policy to cover that specific one. Think about it. Your company grows from one client to a handsome total of eight in just 12 months. Having eight different insurance policies would be a nightmare. Your business insurance should provide blanket coverage, but bear in mind you may need to add specific extras to cover specific elements of the work agreement.
- Contract covers you – Contracts are very important for making clear the responsibilities, requirements and limitations. So, sticking to the terms of the contract means you are covered should something go wrong. In fact, if you breach a term of contract then the contract becomes void, which immediately opens you up to the risk of a full lawsuit.
- Shut the business down to avoid being sued – It’s an old myth but one that has been exposed as a myth so often, it’s a mystery why it is still believed. Closing down your business – thereby ensuring it no longer exists – is not an effective way to avoid a lawsuit. In fact, even if your business is no longer operational, you may have to cover settlements from your personal assets.
For more details on Business Insurance types and typical calculations, check out the ICA’s Understanding Insurance website.
Business insurance from Hamilton Brokers
With so many options, finding a way to adequately secure real protection for your business, its assets, premises and stock, is not a particularly simple task. Here at Hamilton Brokers, we make the process a whole lot easier with a single business insurance policy that covers a wide variety of possible events.
Each of the specific elements is optional, of course, so that you can tailor the policy to ensure it is right for you. These optional sections include:
- Property/Asset Protection
- Loss of Income
- Loss of Money
- Plate Glass
- Public Liability
- Machinery Breakdown
- Electronic Equipment
- Transit of Goods
- Portable Items
- Tax Audit
- Motor Vehicle / Mobile Plant
- Personal Accident
Suitable for SMEs in the manufacturing, storage, wholesalers, property owners, repair workshops sectors, another business policy – Professional Insurance – can be chosen to deal with the risks associated with office situations.
For more information on the Business Insurance options available through Hamilton Brokers, all you have to do is contact us, either by sending us your query through our online enquiry form or by directly calling us on (02) 6124 1250.
This information may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it.