Most businesses start small but aim big. During their growing process they evolve and take on business structures, activities, capital investments, workers and clients that they didn’t have before. This is a positive thing on the whole but it does mean that the growing business now faces risks different in type and scale to what the business faced when it was small.
This increase in risk means that the insurance needs of the business also change. The result is that business owners need to be conscious of this and ensure that their insurance cover is suitable for where their business is now. This article explains the most important insurance types that businesses generally need as they expand.
Workers’ compensation
As a business grows in size it comes to a point where it is too much for one person to handle and so employees are hired. In Australia it is mandatory that employers have workers compensation insurance. The specific requirements of this insurance vary from state to state but the general core is the same. Workers compensation insurance is to provide for the worker who becomes sick or injured because of their work. In such a case, workers compensation will ensure that the injured or sick worker will continue to receive income while they are unable to work. It will also financially support them to get the medical treatment and rehabilitation they need.
Business interruption insurance
When a business is forced to cease operations, often the expenses continue to pile up but the income is sharply reduced. This will lead to loss of profits and curtail the business’ growth. It can also lead to cash flow problems meaning that the business is left unable to pay their bills, business partners or employees on time. It can also result in a loss of customers. Thankfully, this potentially catastrophic risk can be insured against and the business protected. There are a range of events that cause business interruption that can be insured against. An example is a fire taking place on company property causing loss of property. The damage from the fire also causes a business shutdown to clean, repair, replace and retrain. Business interruption insurance can make up for lost income until the business is ready to restart operations. Each business can choose what length of time they will likely need, depending on their own risk profile.
Cyber insurance
Most growing businesses become increasingly reliant on computing and the internet to connect with clients and business partners, to store data and to run their operations. Unfortunately, this opens them up to the wide range of cyber risks. This risk intensifies as the business continues to grow and appears as a bigger prize for cyber criminals. Cyber insurance can cover a wide range of loss causing events including but not limited to dealing with ransom attacks, loss of revenue due to interruption, data recovery, copyright infringement, investigation by a government regulator and legal defence costs.
Professional indemnity
Many businesses are exposed to risks associated with their professional work or advice. In the course of their work with clients a business may cause loss or damage to their client through an act, error, omission or breach of professional duty. In such a case the business offering the professional service or advice may be liable for that loss. This risk is present for small businesses too but is even more important as businesses grow and expand their services. Professional indemnity insurance can protect a business from the legal bills and damages if a claim is made against them.
Public liability insurance
As a business grows, so too do the number and type of risks associated with their interactions with the public. If someone other than an employee is injured or has their property damaged due to their interaction with the business, the business may be liable to pay compensation and legal costs. An example of this could be a tripping hazard that causes an injury to a visitor to the premises. Another example is a customer suing the business for psychological harm caused by a negative and distressing interaction with the business. Since these risks are inherently difficult to predict and there is no upper limit to the damages that could be incurred, public liability insurance is necessary for just about every business.
Management liability
As a business grows and takes on more employees, the risk of these employees doing something or being sued for something that causes financial loss also increases. There is a very large range of risks in this area and they are hard to predict. An employee may commit fraud or a manager may be sued by another employee for their actions at work. Management liability insurance protects the business from suffering financial loss while it investigates, defends and settles claims and also pays any compensation required.
I hope this article has helped clarify some of the most important insurance types that are needed by growing businesses. The best insurance coverage is customised for the individual needs of a business. This tailor-fitting of insurance best comes through the use of an expert insurance broker who understands the insurance world and can thoroughly investigate your business’ insurance needs. Use an insurance broker in Perth to get the best insurance package for your growing business.