Understanding insurance can be tricky. The news is full of stories about people whose businesses aren’t or weren’t properly covered. Too many people don’t realise that their insurance is inadequate until it’s too late!

It’s important to understand the different types of insurance so that you can work out which ones apply to your business.

Is public liability insurance the same as business insurance? The short answer is no. Public liability insurance covers you against damages to other people, while business insurance protects you, your assets, your revenue and your liabilities.

What is Public Liability Insurance?

If you’re a business owner, it’s possible that you may be held accountable for damages to another person or their property at some stage. Depending on the type of business you run, the chances may be minimal, but don’t be deceived: Some people are unpredictable, and the legal costs associated with public liability can be horrific!

Liability insurance covers a person, business, or contractor against legal costs if their negligence, actions, or property causes harm to someone else or someone else’s property. In simple terms, if your negligence is found to be responsible for the death or injury of another person or the damage of their property, you could be charged. In these cases, it’s common for those affected to seek the advice of a compensation lawyer to support their case. Having public liability insurance is important in this situation.

What is Business Insurance?

The term “Business Insurance” is a broad one. It includes various types of insurance designed to protect a business against loss due to events which may happen during regular business activity. This may include protecting your business, income, commercial risk, employees, and members of the public.

Examples of losses that could occur during business activity include:

• Machinery breakdown
• Accidental damage to buildings or inventory
• Worker’s compensation
• Business interruption resulting from fire or flood

How Does Business Insurance Work?

Business insurance works in a similar way to other types of personal insurance you may have, such as car insurance or home and contents insurance. If you need to make an insurance claim for your business, you would go about it much the same as you would if you had a car accident or a break in. You would pay your provider a premium and, in return, they’d cover you. Exactly how much you’d get would depend on your level of cover and the terms and conditions of your policy.

What are the Different Types of Business Insurance?

Exactly which types of insurance you need for your business will largely depend on your industry and your company. Some types of business insurances, such as worker’s compensation, are compulsory in Australia. You may also require compulsory third party insurance if you use a car for work. Compulsory insurances vary from state to state, so it’s important that you understand what is mandatory in your state or territory.

Other insurances you may need include:

Public Liability Insurance

As discussed above, public liability insurance covers a person, business, or contractor against legal costs if their negligence, actions, or property causes harm to someone else or someone else’s property.

Cyber Liability Insurance

Cyber liability insurance covers your business if there’s a data breach. In these circumstances, sensitive data may be leaked that can compromise the safety of your business and employees.

Professional Indemnity Insurance

Professional indemnity insurance covers you when someone claims that your business acted negligently, resulting in the individual being injured, suffering financial loss, or having their safety compromised in some way.

Management Liability Insurance

Management liability insurance helps protect you against claims filed against Directors/Officers in the business. It offers financial support to help defend, pay, or settle these claims.

Personal Accident Insurance

Personal accident insurance isn’t technically under the umbrella of business insurance, though, it’s something to consider if you’re a sole trader or contractor. Personal accident insurance covers you if you fall ill or are injured and unable to work.

Tax Audit Insurance

Tax audit insurance protects you if one of your tax returns is audited and results in unexpected costs (eg accountant fees and associated costs).

Risk Analysis

Determining the type of insurance cover your business should have isn’t always easy. Before you launch into any paperwork, you must carry out a comprehensive risk analysis to ensure that you understand each type of risk facing you and your business. Once you have a good understanding of the dangers, you can take out the appropriate cover.