Insurance is one of those jobs many small business owners put off. It can feel like a cost with no clear return. Yet one large claim against an uninsured business can undo years of hard work. Knowing the main types of cover makes the choice much simpler.
This guide explains the common policies Australian small businesses look at. It covers what the law may require and what is optional. It also explains how to check an insurer or broker before you sign. The rules differ between states and territories, so treat this as a starting point.
Insurance the law may require
Some cover is not a choice. The federal guide to types of business insurance lists three kinds you may need by law. Which ones apply depends on your type of business and where you operate. Public liability is required by some states and territories for certain occupations. Third party personal injury cover is needed if your business uses motor vehicles, and it is often part of the registration fee.
Workers compensation
If you have employees, you need workers compensation insurance. Employers must get it from an authorised insurer. It covers you and your staff against financial hardship if they are injured or become sick because of work. The laws vary in each state and territory, and each one has its own regulator.
Contractors are a grey area. If you engage a contractor, check your obligations with your state or territory regulator. Sole traders should also note that workers compensation does not cover them. Personal accident and sickness cover from a private insurer can pay you an income while you recover.
Insurance pays after something goes wrong, but it does not replace safe work practices. Trained staff and stocked kits are part of running a safe workplace. Our guide to first aid compliance covers the basics. Good safety habits also give your team more confidence on the job.
Liability cover for the work you do
Public liability insurance covers you if someone dies, gets injured or has their property damaged because of your negligence. It is worth having for any business that has customers on site or works at client premises. If a client wants proof that your cover is active, ask your broker or insurer for a certificate of currency. It is usually sent quickly by email.
Product liability covers injury, death or property damage caused by a product you make, sell or supply. This deserves a close look if you bring in goods from overseas. Our article on importing as a business explains other steps that come with bringing stock into Australia. Goods in transit insurance is a separate policy that protects stock while it moves.
Professional indemnity helps cover the cost of legal action from claims against your professional advice or services. It suits businesses that give advice or provide a professional service. Professional associations may offer indemnity cover for their industry at a lower cost. Ask your association before you shop around.
Management liability covers directors, officers and managers for claims about their management decisions. It is usually sold as a package. Company directors may want to talk it through with a broker. Directors and officers cover does not protect against fraud or other deceptive conduct.
Building works at your premises raise their own questions. Before a big project such as a commercial lift installation, ask each contractor for their certificate of currency. That way you know their liability cover is active before work starts. It is also worth reading your own policy for any conditions about works on site.
Protecting your premises, stock and equipment
Building and contents insurance protects the place you work from and what is inside it. Burglary cover and deterioration of stock cover are separate policies worth looking at too. Physical security can lower the risk of a break in before you ever need to claim. A sturdy security fence for your business is one practical step for sites with a yard or outdoor stock.
Read the fine print on natural events. Queensland government guidance describes property damage policies that cover fire, storms and explosions but not floods. Flood cover may need to be checked separately. Keeping your sums insured up to date also helps you avoid being underinsured after a loss.
Electronic equipment insurance covers breakdown, loss or damage at a fixed location. It does not cover theft. Portable equipment insurance covers accidental loss, damage or theft of tools and equipment you take to jobs. Cyber insurance is another option that helps protect your business from the costs of cybercrime.
Cover for your income and for you
Business interruption insurance covers ongoing costs after an insured event stops you trading. Employee dishonesty insurance covers theft or fraud by staff. Owners can also look at income protection, life, total and permanent disability and trauma cover. These policies protect you personally rather than the business.
Running a business from home
Many small businesses start at the kitchen table. Your home and contents policy may not cover business activity. Queensland government guidance says it may still apply if the business uses less than 20% of the home and no customers or suppliers visit. Check your policy wording and tell your insurer about the business.
Choosing an insurer or broker
Ask insurers if they offer packages for your type of business. A package can be cheaper than buying separate policies. You can check that an insurer is authorised on the APRA general insurance register. A broker’s licence can be checked on the ASIC professional register.
A broker is a good option if you are unsure what you need. By law, an insurance broker must represent your interests. Brokers do not work for any single insurer, and they can help with the technical side of making a claim. Talk through your daily work in detail so nothing is missed.
A short checklist helps once quotes start arriving. Go through it with each insurer or broker. Take notes so you can compare the answers side by side.
- Which policies the law requires for your industry and state
- What each policy leaves out, such as flood or theft
- Whether your sums insured match what it would cost to replace things today
- How quickly you can get a certificate of currency
Frequently asked questions
Is business insurance compulsory in Australia?
Some types are, depending on your business. Workers compensation is required if you have employees. Third party personal injury cover is needed for business vehicles, and some states require public liability for certain jobs. The rules differ between states and territories.
Does workers compensation cover me as a sole trader?
No, it does not cover sole traders. You would need personal accident and sickness cover instead. This type of policy pays income while you recover. Check the details with an insurer or broker.
What is a certificate of currency?
It is a document that confirms your insurance cover is active. Your broker or insurer can issue one. It is usually sent quickly by email. Keep a current copy handy for jobs that ask for proof of cover.
Can my professional association help with insurance?
It is worth asking. Professional associations may offer indemnity insurance for their industry at a lower cost. Compare what is covered as well as the price. Check the limits and exclusions before you sign.
This article is general information only and is not financial or legal advice. Insurance laws and requirements differ between states and territories and can change. Speak with a licensed insurance broker or a qualified adviser about your own situation.
