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Dec 2019

Why do small businesses need business insurance?

December 4, 2019
Capify Australia
Small business insurance
Protect your business with the right insurance cover.

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.

The government mandates (https://www.business.gov.au/risk-management/insurance/business-insurance) that all business need to have Workers’ compensation insurance if they have employees.

Each state operates its own worker’s compensation scheme.

ACT: www.worksafe.act.gov.au

NSW: www.workcover.nsw.gov.au

NT:  www.worksafe.nt.gov.au

QLD: www.workcoverqld.com.au

SA:  www.workcover.com

TAS: www.workcover.tas.gov.au

VIC: www.worksafe.vic.gov.au

WA: www.workcover.wa.gov.au

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 restored.

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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