8 types of business insurance
Much like home insurance, there are policies to protect business buildings and their contents from theft, fire and some forms of natural disaster. It’s common for a business to have all its assets in one building, so this type of insurance is popular.
Most of us have had motor insurance at some point. It works the same for business vehicles, covering loss and damages due to accidents or theft. It should include care for injuries and some protection against lawsuits by other drivers.
3. Public liability
This kicks in if your business causes loss or damage to other people’s property, makes someone ill, or injures a member of the public. This type of business insurance can also cover punitive damages, where a court orders you to pay extra money over and above compensation. Public liability doesn’t cover workers. You’ll need a separate policy if you employ people.
4. Employer liability
If you have employees, you’ll be required to carry this type of business insurance. It provides financial help if an employee is injured or killed on the job. It’s not a substitute for good health and safety practices – you’re also required to make the workplace as safe as possible.
5. Professional liability
If you make a mistake in your work that causes harm to others, you can get into a lot of trouble. Professional liability insurance helps you cover the economic damage. This kind of policy is often compulsory for businesses that give legal, medical, engineering and financial advice.
6. Business continuation
If your business is closed down or slowed down for reasons you can’t control, business continuation insurance can be handy. Depending on the policy, this type of business insurance can replace some lost income and provide cash to get you back up to 100% capacity sooner.
7. Key person insurance
A small business can take a hit if an important employee has to stop working. Key man or key person insurance gives you a cash payment to help hire freelancers or recruit a replacement if one of your main staff members goes down with a long-term injury or illness.
8. Shareholder protection
If you’ve formed a company with someone who dies, shareholder protection gives you the money to buy back their share in the business. It can be a useful payment for the bereaved family, and it helps avoid a messy situation where their estate gets involved in business decision-making.
Getting started with small business insurance
Take time to think about what you need. Under-insurance is a massive risk, but over-insurance is an unnecessary cost. Don’t go straight to an insurance broker. Speak to other business owners and an accountant first. They’ll have great practical advice.
Reviewing your types of business insurance
Review your insurance regularly. Your risks and responsibilities will change over time, so check you’re on the most cost-effective policy bundle. Pay particular attention if you change your business structure from, say, a sole proprietor to a company.
Powering through a disaster
Being prepared and being insured are two different things. Consider making a business continuity plan to help steer you through difficult events – from natural disasters to the loss of a major client.
Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.