The Insurance Council of Australia estimates that 70% of underinsured and uninsured small businesses affected by a major event, such as a legal claim, earthquake, fire or storm, never recover. Assessing and managing your risks, as well as taking out the appropriate insurance, will allow you to minimise liabilities and continue to trade despite interruptions.
Property & assets
No matter the scale of your business, insuring fixed assets such as your products, premises, motor vehicles, manufacturing equipment and electrical goods will help you continue operating if they are damaged, stolen or destroyed due to unforeseen circumstances. It is an alarmingly common misconception among home-based business operators that their business is adequately covered by a standard home and contents insurance policy. In most cases this is not correct.
What is fire insurance?
An insurance policy covering fire and other perils can protect you against a range of unforeseen events that may threaten your business. Similar to a house and contents policy, a general fire and other perils policy will cover your business premises, contents and equipment against certain types of damage. Although each policy will specify which events are covered and which events are excluded, the events typically covered by a basic fire policy include the following:
- • fire
- • lightning
- • explosion
- • earthquake
- • vandalism
- • damage caused by animal or tree
- • riot or industrial dispute
- • storms
- • wind or water
It is important to check your policy thoroughly.
Insuring your premises
Whether your business operates from a factory, warehouse, shop or your home, if you own the business premises you should insure it against potential damage. Your premises is likely to be your single largest business asset, especially if you are a small operator. The loss of such an integral asset through fire or explosion could be disastrous. A range of policies are available to protect your premises against common hazards.
Without the correct business insurance you run the risk of losing your premises and equipment due to unforeseen events.
Home-based businesses
It is an alarmingly common misconception among home-based business operators that their business is adequately covered by a standard home and contents insurance policy. In most cases this is not correct.
Home-based businesses are subject to a range of risks that can leave an incorrectly insured operation vulnerable to many hazards. A 2004 study by the Business Enterprise Centre Australia (BECA) found that although 92% of Australian home-based businesses always use locks and alarms, over 60% are either incorrectly insured or are not insured at all.
While locks and alarms may minimise the risk of your home and business being burgled, without the correct business insurance you run the risk of losing your premises and equipment due to unforeseen events.
The BECA study found that around half of Australia’s home-based businesses provide the major source of income to their operators. This means that any loss or damage to a home-based office or equipment would cause significant financial hardship for many owner operators.
Who can help?
An insurance broker can assist you with further information on the range of policies relevant to your operation.
Each business will have different requirements, so it is important to seek the advice of qualified professionals with experience in the area of business insurance.
<byline>Steven McInerney (QPIB) Dip FS (Broking), MGA Insurance Brokers, www.mga.com
