How do you Balance the costs of Insurance with the Risks to your Business?
As a business owner, one of your biggest priorities is to manage and reduce the long list of risks faced by your company.
Risks can include (but not limited to):
Border Closures / Lockdowns / Supply Chains Disturbances;
Marketplace / New Competitors / Technology Advancements;
Health and Safety Risks Exposures at your Workplace/Site;
Cyber & Data Breaches/Hacking;
Property Damage/Theft; and
Liability Exposures / Bad Advice / Unfortunate Circumstances.
There are many ways to mitigate these risks, one of the strategies you have available is transferring risks to obtain protection from adopting appropriate insurance products.
How Much is Too Much vs How Much is Not Enough - Risk Management?
Business owners need to balance the likelihood of these risks against the cost of insurance. It can be likened to a risk vs reward scenario – for example, you could be prepared to face the risk of your carport being damaged, however you probably won’t take the same risk of your building burning down. If you decide to forgo insurance, then you must believe that this risk is low and balance is tipped in favor of the reward – which is saving the money you would have spent on the insurance premium.
However, if your building does burns down and you lose all your plant & equipment, machinery and stock, the loss will greatly outweigh any premiums you saved by not having property insurance. It all comes down to the balance between Risk vs Reward, which is why you should always opt to tip the balance in your favor by having the right insurances in place.
If you are not convinced that insurance can tip the balance in your favor, let’s look at two policies you must have (regardless of your thoughts on insurance) and other policies that can help tip the balance back in your direction.
Insurances you Really Should have as a Business Owner
Worker’s Compensation: If you employ staff, then you must have Worker’s Compensation Insurance. This is a legal requirement, and one that is there to not only protect your staff, but also yourself. This insurance covers your workers in cases of work-related accidents and pays both ongoing wages and lump sum amounts in the event of permanent disability.
Third party personal injury insurance for cars, utes and trucks: If your business owns cars, utes or trucks, then you are legally required to have third party personal injury insurance. This covers the costs incurred by third parties (being people who are not your family and other businesses) if your vehicle is involved in an accident. Comprehensive insurance or Third-Party Property damage covers are not mandatory, but should be considered.
Insurances to Tip the Risk vs Reward Balance in your Favor
Public Liability: Covers third party claims of personal injury or property damage as a result of your business activities at your workplace or customers premises.
Product Liability: Covers third party (being people who are not your family and other businesses) claims of personal injury or property damage as a result of products sold by your business (whether as a manufacturer, retailer or reseller).
Property Insurance: Covers damage from events such as fire, storm, wind, hail, lightning and theft to your buildings, plant & equipment and stock. It can also extend to loss of business income following the damage.
Professional Indemnity: Provides protection against actual or alleged unprofessional advice, which has caused or resulted in financial loss to third parties. Professional advice is very broad and can be advice incidental to a product sale, as well as from an engineer or allied health worker.
Cyber Crimes: Covers losses incurred by you or the business and damage you cause to third parties, such as passing on malware, fraudulent payments, phishing, ransomware and so on.
Only you can fully understand the cost in time, money and reputation that can occur if your business is faced with significant loss. So, if you want to ensure optimal balance between cost and risk, why not review your insurance cover and requirements with a specialist?
To review your insurance policies for your business, talk to Risk Guidance Insurance today.
General Advice Warning
The information provided is to be regarded as general advice. This type of insurance product is designed for small and large businesses, who want to be covered against financial loss of income to the business, following a fire, storm or other type of insured loss. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider relevant product disclosure statement(s) before making any decision to purchase this type of financial product.