All business activities have an element of risk and may require insurance cover. Whenever you sell a product or provide a service, there’s potential, albeit probably very small, that something could go wrong and the customer comes back to you for some form of compensation. Or perhaps a key piece of equipment fails. Maybe you fall ill and can’t work. However you look at it, there are many reasons you might want to find ways to mitigate the impact of those things happen.
Insurance doesn’t stop bad things from happening. But it helps minimise the pain caused by events that are often outside your control.
There are some forms of insurance that are mandatory for all Australian businesses.
There’s also Public Liability insurance to cover you for third
party death or injury and Third Party insurance if you own a car (this is
usually part of your vehicle registration fee).
Once you cover off your legally obligated insurance, you can
start looking at other coverage you might need.
Recently, a jewellery shop in Melbourne caught fire with much of
the store destroyed. But that store wasn’t the only victim. The neighbouring
cafe was also heavily damaged, resulting in the lost of stock and equipment.
The two store owners ended up with very different outcomes because they had
assessed the risks differently and took out different insurance coverage.
Both stores were closed for many months. The jeweller was able
to call on his insurer to cover the loss of stock, shop-fittings, computer
systems and other equipment essential for the operation of the business. But
they also had insurance to cover the loss of income while the store was being
The cafe owner, had almost the same level of coverage but lacked
the important element of income protection. So, while they were able to rebuild
the cafe, there was no income. As a result of that loss, they were unable to
return to the business that they’d built from the ground up.
While a fire might seem like a low probability risk, the impact
can be catastrophic. Other challenges, such as floods, cyclones or other events
can be crippling to small business. Insurance can offer some mitigation against
the impacts of such events.
Small businesses can include sole traders who provide
consultancy services to other businesses. Having insurance, and making that
clear to potential clients when pitching for work, adds to your credibility as
a serious company. And Professional indemnity insurance protects you from legal
action taken against you if someone suffers a loss after following your
professional advice or as a result of your receiving your service.
Whether your business operates from offices, a factory or a room
at home, you may be the victim of theft. Having appropriate insurance to ensure
important assets such as tools, computers or specialist equipment can be
replaced in the envoy of theft is important. Just as the cafe owner lost their
livelihood for many months, being without the means to replace an important
tool can cripple your earning capacity.
One final piece of insurance small businesses might need to
consider is cyber-insurance. This emerging area is becoming more important as
criminals use tools such as ransomware to cripple your computers and lock up
your data. If you are highly dependent on your PCs, then it might be worth
thinking about mitigating the risk of having to pay for technical help should
your business suffer a tech attack.
Small businesses might operate with lower revenues and different
risks to large corporations but the impacts of theft, disasters and data losses
can be felt far more acutely by owners and operators. Insurance doesn’t stop
bad things from happening. But choosing the right insurance for your business
means that the impact of an incident can be reduced.
Risk experts categorise risks using two key metrics; likelihood
and impact. Insurance doesn’t change the likelihood. But it can mitigate the
impact and turn a potentially business-ending incident into a manageable bump
in the road.
Depending on your industry, business insurance costs can vary significantly. While the costs for some small traders might be less than $1000 per year, they can cost in excess of $100,000 for some branches of medicine or tens of thousands for some professional services.
Choosing a loan, form a provider like Capify can help manage the impact on cash flow such a large investment.
You can access $10,000 to $300,000 with a 24-hour* approval with minimal paperwork and no security required. We’ll also work with you to ensure your repayments are easy on cash flow and offer you a quick renewal process.
Simply click here to get started on an obligation free quotes and see how much we can approve you for.
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