entrepreneur-593361_1920, Walker Wayland

Sep 2018 3 Minutes

Insurance For SMEs

Insurance for SMEs. Small/medium enterprises need a properly constructed insurance portfolio.  To enable this to be done, you will need to identify business risks that apply to your business.

Insurance brokers are a very important member of the “insurance system” for small businesses to utilise.  The insurance broker represents you as the small business operator.  You need to tell your broker everything about your business so that they clearly understand the risks that apply to your business.  The insurance broker will give you advice – you need to remember that insurance companies are not required to give you advice.

The main insurance policies for small/medium enterprises identified by insurance brokers include:

  • Public Liability
  • Professional Indemnity
  • Product Liability
  • Workers’ Compensation

Most small businesses have public liability covers of around $20M.

Product liability is very important for businesses producing products.

Professional indemnity is important for anyone who is supplying professional services (eg lawyers, doctors, engineers, accountants) and shouldn’t be confused with public liability.

If you have businesses operating in different states, you need to take out separate Workers’ Compensation policies in each of those states.

When reviewing your insurance policies, look very closely at the exclusions and make sure you’re happy with the items excluded.

When signing up for an insurance cover, you have a duty of disclosure, which includes:

  • details of any insurance that has been declined or cancelled
  • information as to whether the applicant has ever been declared bankrupt
  • information on whether any claims have been made by the applicant in the past
  • details of any exceptional circumstances relative to the risks which may affect the insurer’s decision as to whether to offer the insurance cover to the applicant

The more information you give, the more likelihood of “less perceived risk”, which will lower the insurance premium.

The premium is determined on things such as:

  • the nature of your business
  • claims history
  • the location of your business
  • types of cover your business requires
  • size of your business
  • sums for which your business is insuring

Why would you use insurance brokers?  Insurance brokers save time and money and provide peace of mind from dealing with professionals acting for your business, so that you get the right insurance at the right price.  Insurance brokers provide expert knowledge and advice and they provide a great service.

You should be including your insurance costs in your budget.  Remember that you can pay most insurance premiums monthly.

Another important service that insurance brokers can bring is an “Industry Risk Review” for your type of industry.  This will assist you in planning the risk management plan for your business.

Insurance is something that every business needs.  It could be quite costly; however you need to ask a question: can your business afford to wear a loss because you were under-insured or have no insurance at all?  Insurance brokers work for the business and their role is to make sure you get an adequate insurance cover.