A recent encounter with a tree trunk while mountain biking taught me that running a small business is not very compatible with a couple of cracked ribs. I also learned that “resting” — that is, continuing to tap away at the laptop in bed, propped up with extra pillows — is neither productive nor comfortable. Not surprisingly, my rather annoying situation got me thinking about insurance, so this month we’re discussing how to plan for those… err, unplanned little incidences.
Why have insurance?
“It’ll never happen,” you say. Yeah? Tell that to my friend who, as a teenager, found himself in the awkward position of needing to streak naked across the lounge room in front of his mother and her girlfriends.
Unfortunately, the impossible happens all the time. My friend’s story is hilarious (he laughs about it now… 20 years later), but very few disasters have a funny side, as we saw with the Queensland floods over Christmas and New Years. The fact is that you’ve worked hard to build your small business — you work on average an extra 10 hours a week than other people and have most likely gone without a few of life’s luxuries to get where you are today. Still tempted to overlook insurance or pooh-pooh the price of premiums? Consider these statistics:
- Crime risks are higher for small businesses than for households
- 49% of respondents in the Small Business Crime Survey experienced at least one incident of crime in the last 12 months
- A fire costs a small business an average of $72,235
- 1 in 3 Australians are disabled for more than three months and have no income during their working lives
- For every home lost to fire, 48 homes are lost to disability
- 127,000 employers and self-employed Australians were injured at work in the last year, according to the latest ABS statistics
What insurance to get
By law, any business that employs people, even if you’re the only employee in your own incorporated company, must have WorkSafe Injury Insurance. Many business owners mistakenly believe WorkSafe is all they need. What they don’t realise is that this insurance does not cover those operating as sole-traders or in partnerships. What’s more, it only covers accidents and injuries that occur during work hours or illnesses that are a direct result of employment. Statistics, however, show that 70% of accidents happen outside the workplace and that an equal number of trauma claims are for cancer, stroke and heart disease, which are rarely work-related. The solution is to hold sickness and accident, and income protection policies. Experts also strongly recommend business owners hold public liability, product liability and professional indemnity insurance, depending on the industry you’re in. Other significant policies to consider include:
- Fire and perils
- Equipment and general property
- Goods in transit.
And others to research or be aware of are:
- Business interruption
- Directors and office bearers liability
- Employee dishonesty or Fidelity guarantee
- Electronic equipment and breakdown
- Employment practices liability
- Glass breakage
- Income protection insurance
- Key person insurance
- Loss of money
- Machinery breakdown
- Perishable food or stock deterioration
- Motor insurance
- Product recall
- Tax audit
- Trade credit
- Unregistered equipment
Where to get insurance
The same companies that provide personal insurance generally also deal in the various business products. In fact, many providers offer insurance tailored specifically for small business, and have products to fit the distinct needs of individual sectors, such as hospitality, retail or the manual trades, or allow you to build a package to suit your personal needs. It goes without saying that packaging your policies together is generally cheaper, and that it’s wise to compare quotes and the fine print from several providers. Alternatively, an insurance broker can offer a more independent and over-arching view of the business insurance policies available, not to mention do all the leg work for you! A good one can:
- Expertly match your needs to available policies
- Make sure you’re not over-insured and, thus, paying unnecessary premiums
- Help you make a claim or negotiate a settlement
- Work as a consultant to manage the insurance side of your business.
How to minimise the risks
Not surprisingly, all the insurance in the world won’t keep your business operating smoothly if you snorkel a little close to a swarm of electric eels or a plague of locusts devours your entire inventory. If this happens, won’t you be pleased you listened to this advice:
- Keep back-up copies of important documents in a second location
- Keep an address book of important contacts
- Prepare a procedures manual or train staff how to do important tasks if you or other key personnel are not available
- Have a loss prevention strategy if you’re in retail
- Review your postcode — some locations have higher crime rates or are more susceptible to natural disaster. It may never happen, but you’ll still be charged higher insurance premiums
- Train your staff in occupational health and safety and, please, find ways to make it appealing. Continually look for ways to make the workplace safer and happier.
And finally, back to those bruised and painful ribs of mine … please contact herBusiness if you’d like to send me a “get well” card or, even better, a bottle of champagne and a box of chocolates!