Apr 27, 2015

Business Insurance: What You Need to Know

Setting up a new business gives you a lot to think about, with an important consideration being how you are going to protect and insure yourself. There is a vast range of insurance policies out there for small businesses, and it can be extremely difficult deciding an option that suits you. We have collected some information on the ones most appropriate to new business owners, to help you get started.

Public Liability Insurance

What is it?

Public liability insurance covers anyone who suffers injury inside your workplace, or as a result of doing work for you. Public Liability insurance also covers damage to property or possessions of members of the public and employees, from your businesses activities.

Do I need it?

This type of insurance would be necessary for businesses with staff carrying out physical labour, but also covers clients, customers and anyone else who enters your workplace.

For example, you would be covered if an employee is injured whilst working on site somewhere, but also if a customer or member of the public enters your workplace and injures themselves. Additionally it protects any damage your company may cause to a third parties property or possessions whilst conducting your business activities.

The insurance would include the compensation to the injured person, property or possessions and also the legal costs involved.

Cost?

Generally public liability insurance is tailored to suit the companies needs and fit with their type of work, and the amount of cover you may need.

Professional Indemnity Insurance

What is it?

Professional Indemnity insurance protects businesses and employees who give out professional advice and provide services, against a negligence claim by a customer. It covers claims based on material, financial or physical loss of a client, as a result of advice or conduct by the professional service provider. It is different from other general types of public liability insurance, as the conduct is non-physical damage.

Do I need it?

Professional Indemnity insurance is most suitable for professionals who are service and advice based businesses, such as accountants, lawyers and doctors, but it may also be suitable for businesses that provide products or services.

For example, if a software product fails to perform properly, there are no physical or personal damages so general liability insurance would not cover the conduct. However the conduct may cause direct financial losses, which is a result of the software developer's misrepresentation.

Whilst this type of insurance covers negligence, misrepresentation and misadvise, it does not cover any illegal or criminal action.

Cost?

The cost of professional indemnity insurance largely depends on the size of the business - a sole trader's costs would be significantly lower than a company that has multiple employees that need to be covered. Additionally the cost is also largely based on the percentage of your companies total legal spend and the likelihood of the company being taken to court.

Product Liability Insurance

What is it?

Product liability insurance is recommended for any business that sells, supplies or delivers goods, which may also be in the form of repair or service. It will cover you and damage or injury to anyone who uses or comes in contact with your product. Product liability insurance covers claims for personal injury and property damage cause by products sold or supplied by your business.

Do I need it?

Product liability insurance would be suitable for any businesses that sell or supply products to their customers or members of the public. Despite if the product is completely safe, something may still go wrong and cause injury or damage. Businesses such as equipment or software providers, or food and beverage suppliers would benefit from this insurance especially.

Cost?

The cost of product liability insurance is variable depending on the types of products that are being sold or manufactured. For example a supplier of alcohol would have a greater insurance cost than a juice supplier, and is dependant on the individual business.

Workers Compensation Insurance

What is it?

Workers compensation insurance is a compulsory statutory scheme for all employers, whereby it protects employers from any injury, illness or death suffered in the workplace or as a result of the work being carried out, to an employee.

Do I need it?

Workers compensation insurance is compulsory for all employers throughout Australia. An employer is defined by any business that employs or hires full-time, part-time or casual workers, under a written or oral contract.

Employers who are exempt from adopting this type of insurance are those who pay less than $75,000 per annum in wages and who don't employ an apprentice or trainee.

However, despite being exempt from compulsory workers compensation insurance policy, employers are still under the same obligations to provide assistance for injury.

Cost?

Workers compensation premiums depend on the nature and risks involved with the work, as well as the size of the business and number of employees.

General Property Insurance

What is it?

General Property insurance covers loss or damage to specific property within the business that is not covered in your policy at the place of business. For example it generally covers work equipment, theft, loss of property, fire and water damage.

Do I need it?

This type of insurance is useful for contractors and businesses than operate away from the office, as it covers equipment and property loss or damage that isn't at the premises. It covers items such as tools in trade, portable electronic and stock.

Cost?

The cost for general property insurance is decided upon the type of property being insured, the value and security of each item and the method of transportation, if any, of the property.


Starting a business is a big enough consideration on it’s own, let alone trying to determine what types of insurance are needed to protect your business. The above points are designed to breakdown the purpose, usefulness and cost of each type of business insurance in order to help you decide what’s best for you.

This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.

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