If you're just starting out in business, insurance should be a top priority. This is because once you have opened a new business, insurance can be one of the most important factors in ensuring you stay open.
According to John Clark, Steadfast’s Broker Support Manager, your first priority should be ensuring you have the statutory insurances all businesses are required to have in place.
“You need to have workers' compensation if you have employees. Also take care to ensure you take out this cover even if you have a proprietary limited company and you are the only employee of the company. You also need insurance if the business has vehicles, including CTP greenslips,” he says.
“When putting insurance in place, it’s also important to ensure assets are appropriately valued”
It’s also important to take out public and possibly product liability insurance. These policies can cover bodily injury or property damage to the public as a result of running your business and if you sell products.
Then make sure the equipment, stock and the building protected. This means that in the event a fire or loss causing damage to the assets you own, the cost of their replacement can be covered. It’s also important to have business continuity/interruption insurance so the business can keep running even after it has suffered a serious incident covered by insurance.
Steadfast brokers are able to use a tool to identify risks to which the business is exposed, based on the claims other businesses in the sector have made. “Every business has very different exposures – so the insurance a sandwich shop may need will be very different to the insurance a baby goods shop will need. Brokers can assist their clients determine the relative risks to which each business is exposed. But it’s up to the client, ultimately, to decide which covers to put in place,” Clark explains.“Risks also vary from business to business. For example, one sandwich shop may have an especially slippery floor.
While another one may have equipment that’s not well maintained. So the risks these businesses face vary enormously, even though they are both sandwich shops,” he adds.
When putting insurance in place, it’s also important to ensure assets are appropriately valued, so that in the event they are destroyed or damaged, their full replacement cost can be covered.
“One client had a factory and the owner wanted to ensure it for $2 million. But a valuer assessed it’s replacement cost, including Council requirements at $6 million. When they experienced a fire two years after we put their policy in place, they were very grateful the factory insured for its full value under the policy so that it could be rebuilt without the business owners having to take out a loan or find other funds to restore their enterprise to its former state prior to the fire,” says Clark.
“That would have put immense financial pressure on the business to the point at which it may not have been able to get back to business,” he adds.
The best advice is to work with a broker to establish the full gamut of the enterprise’s exposures to ensure the right insurance is in place so that it can continue to operate even if the risks to which it is exposed come to fruition.