Understanding business insurance

Even if you have comprehensive insurance cover, it pays to think about how you’d be affected if the worst happened, and to put together a plan for disaster recovery or business continuity.

For example, have you got a back-up for your IT and data? Are your people set up to work remotely if needed? Can other people in the team step in if a key person becomes ill? 

Business insurance focuses on keeping your business running, and making sure you’re compensated for lost revenue if the unexpected happens.

But one size doesn’t fit all. The type and level of cover you need depends on your business.

For example, if you’re a consultancy, you might insure against liability that could arise from the advice you give to clients. A manufacturing business might consider insuring its plant and stock. And if you’re a tradesperson, you’ll probably want to insure not only your tools, but your ability to earn.

Here are some of the main types of business insurance that could apply to your business.

This covers against the risk of accidental loss or damage to physical assets such as your property or buildings, machinery, materials, stock, tools, fixtures and fittings, office equipment, and other contents – even your customers’ goods in trust.

If your business can’t operate normally, e.g. because of fire, flood, burglary, or the breakdown of a critical machine, this covers you for things like staff wages and lost income. It may also cover the extra costs in keeping your business running. For example, if you need to bring in generators for power or find temporary premises.

Generally, the amount you’re covered for is based on a prior assessment of your business’s gross profit. You can use our calculation to work this out.

This covers you for legal defence costs if your business causes injury or damage to other people or their property. Depending on your business type, you can insure against many different types of liability, including:

If you or your staff cause accidental damage to someone else’s property. For example, if you run an arborist business and an employee accidentally damages someone’s property while trimming trees.

If you unintentionally breach an Act of Parliament covered by the policy. For example, a retailer breaching the Fair Trading Act, or a builder breaching the Health and Safety at Work Act, may face prosecution and legal defence costs.

Cover for accidents and illness to your employees that aren’t covered by ACC. For example, reparation costs you may be required to make to an injured employee.

If something goes wrong because of the advice, services, or designs you provide. For example, if you’re a designer and you design a product that breaches copyright, or if you certify work as compliant but it’s not.

Provides financial compensation to help defend directors and officers against allegations of mismanagement.

This covers you against loss or damage to your vehicles, as well as damage caused by your vehicles. 

It’s particularly important if your vehicles are key to your business operations, e.g. to deliver products or get to jobs. If so, consider ‘loss of use’ cover while the vehicle is being repaired.

People are the lifeblood of any business. This insurance protects against the impact of you or important staff members being unable to work. For example, it could cover the cost of employing a replacement if you can’t work due to illness or injury. Or it could compensate you if a staff member with critical business expertise or relationships can’t work due to illness or injury.

This covers you against financial loss following hacking, viruses, or attacks on your electronic systems and data, as well as legal costs and expenses relating to third-part claims, e.g. for failing to keep data secure. It may also include help from tech specialists.

You’ll find a range of options to cover specific risks.

For example, if your business is highly dependent on machinery, you can get machinery breakdown insurance to ensure that if anything goes wrong, your machinery can be repaired or replaced. Or if you’re a property developer, you may want to take out contract works insurance to protect against problems or issues during construction.

Insurance is critical for businesses of every size and type, but a good insurance policy isn’t the only way to shield your business from risk.

Could another company start selling your information as if it was their own? You may have more intellectual property (IP) than you realise. Your original start-up idea and the products you develop are worth protecting.

Get advice on whether you can include IP clauses in contracts and employment agreements. 

Assert your copyright over content you create (or choose Creative Commons if you prefer). A specialist intellectual property expert can help you assess the risk in this area and advise whether you need to seek patents, registrations, or trade marks. 

Many businesses share content in return for newsletter sign-ups or to encourage further enquiries. Just make sure you ask to be credited when your content is used. 

Choose your staff carefully and have them sign a clear employment agreement so both of you know where you stand.

Get legal advice on whether you can include a restraint of trade clause for key employees. Check it's an enforceable clause before putting it in your employment agreements.

You won’t find any rules about how much insurance cover you need for your business. Lenders, customers, or legislation may require you to have certain insurance cover. But apart from that, it’s up to you.

Take the time to carefully think through the risks your business faces, and assess the impact on your business if any or all of them occurred. Insurance has a key role to play in protecting against those risks.

When taking out insurance cover, you also need to understand exactly what’s not covered by the policy. Don’t wait till something goes wrong to find out what’s not covered. Make sure you read the policy documents and ask questions.

Keep an eye on your cover and change it when your risks or other aspects of your business change. It’s a good idea to review your cover at least once a year. 

By working with our insurance partners, we can provide you with an insurance package tailored to your business. Talk to an ANZ Business Specialist for a no-obligation chat about your business insurance needs.