You have put in the time and effort, and now your business is growing, just as you had imagined. Even though the success is wonderful, your flourishing company may be at risk of underinsurance. This is especially true if you have not reviewed your coverage recently.
Business Australia’s recent report shows that two-thirds of Australian businesses do not have adequate insurance cover. The consequences of underinsurance can be devastating. You stand to lose everything you have worked so hard to achieve.
To protect your business and yourself, you need to take a proactive approach to your business insurance. Plan to make updates before it is too late. While each business will have different specific insurance cover needs, here is a list of several types of business insurance policies that are standard for a significant number of companies across numerous industries.
1. Business Interruption Insurance
As your business grows, many features grow along with it. When considering growth, business owners often think of customers, profits, and company value. However, as your business expands, you will see an increase in what you are charged for many costs of business. Payroll, utilities, equipment, and a bigger place for your business are just a few of the areas that increase in price as you grow. At the same time, you may notice that your cash flow is a bit thinner than usual. It is necessary to safeguard your profit margins should problems arise.
When your business is costing more to run, it is time to think about how you would manage if you were forced to close shop for some time. Business owners tend to believe that they have all potential problems figured out because they have some business insurance cover. But many owners do not consider that someone must pay the bills no matter what.
Business Interruption Insurance exists to help business owners avoid long-term financial chaos. The pandemic was a horrific example of an unforeseen circumstance upending life as we knew it. It also illustrates how business interruption insurance can be extremely useful.
While each business interruption policy is different, here is a list of what a standard policy would cover:
- Loss of profits you would have made if your business had been open
- Impact a supplier’s damage has on your operation
- Closure of your business because of government-ordered curfews or street closures
- Ongoing operating costs like rent or utilities
- Relocation costs
- Retraining costs for learning to use replacement equipment
2. Cyber Insurance
While the technological advances we enjoy have improved our lives, internet connectivity has also opened businesses up to cybersecurity threats. The top two cyberattacks you should be concerned about are ransomware attacks and data theft.
- Ransomware Attacks – In a ransomware attack, your company’s files are encrypted and made inaccessible until your company pays the attacker ransom. These attacks have cost Australian businesses over 6 billion dollars. While developers and governments try to create new ways to clamp down on ransomware attacks, hackers continually perfect their skills to overcome security measures as quickly as possible.
- Data Theft – When a company is the target of a successful data breach, problems come from more than one direction.
Typically, when a business whose data has been compromised publicly announces the crime, its reputation will take a hit in the national or even international community. Some businesses recover over time, and others do not. Recently, governments from all over the world have increased the punishment against businesses that fail to protect clients’ personal information.
Often a business can survive the damaged reputation but cannot overcome the costs associated with government sanctions and potential customer lawsuits and end up closing its doors. often, smaller businesses will decide that they do not need insurance to protect them because of their size. However, the small size and limited IT budgets make small and medium-sized enterprises (SMEs) vulnerable to compromise. These are the reasons you need strong cyber insurance.
3. Employer’s Liability Insurance
Once you no longer work for yourself, you are legally mandated to purchase worker’s compensation insurance. However, even if you carry the cover, there are still exclusions within the policy.
You can think of an employer’s liability insurance policy as a backup plan for worker’s compensation insurance. The cover is not a legal requirement, but it is a smart way to offer your workers extra peace of mind.
4. Professional Indemnity Insurance
If your company revolves around giving clients advice (primarily financial, legal, or medical), you likely will benefit from a professional indemnity insurance policy. You will have protection from clients’ lawsuits if they believe your advice is bad.
5. Public Liability Insurance
If your company has grown to the point where you believe projects away from your brick and mortar location are in order, you should consider public liability insurance. For example, your artwork has become so popular that clients want you to come to their homes to paint murals on their walls.
Before you start going into clients’ homes to paint, make sure you have insurance cover to protect you because you may break a valuable item or spill paint on their expensive rug. Public liability insurance will cover third-party injury at your business or on a client’s property, and it protects your workers acting on your behalf. It will also cover damages claimed by other companies.
6. Directors’ and Officers’ Insurance
Your company’s continued growth often brings the need to restructure. You may move from a partnership to a company model with the typical hierarchy structure. Your upper-tier employees take on many additional responsibilities. The people filling these positions (executive directors, non-executive directors, executive officers, board members, senior managers, and other key staff with greater responsibility) should not have concern that they could suffer financial loss because they did their job. In this case, having a directors’ and officers’ insurance policy in place is the best course of action.
Essentially, directors’ and officers’ insurance mean your high-ranking staff members can be reimbursed for legal expenses if a suit is filed against them by competitors, liquidators, shareholders, employees, and other entities. Offering this protection to your key team members is a smart business move and one that your employees will appreciate.
If you believe your business insurance coverage may not be keeping pace with your growth, or if you would like a review of your policies for peace of mind, feel free to reach out to Grace Insurance. Our team of experts will make sure that you have the right amount of insurance to keep your company safe if disaster strikes.
The material presented here is for information purposes. It is not meant to replace a personal consultation with an expert and is not binding insurance advice. These are general suggestions and may not correlate with your company’s insurance needs. Please get in touch with an insurance expert before you make changes to your policies.