Insurance Explainer
There are many types of insurance that you may need for your business. Some of these are discussed below. This advice is general in nature and you should always talk to your insurance broker for tailored advice.
Property
Proving cover for material loss or damage to business property at the situation of risk. Typically covering Buildings, plant, machinery, stock and customers goods and should include enough to cover removal of debris as may be required following a major loss such as fire.
- You must ensure the declared values & limits of indemnity in each category are adequate for full replacement based on the current new value.
- If you under-insure and make a claim a co-insurance/average clause may apply, whereby you may receive less than the full value of the loss. The amount you may / will receive is generally reduced to the same proportion that the amount you have insured bears to 80% of the actual full replacement value of the total property insured.
Any business that has a place of business and equipment inside that building should have this insurance in place. This would apply to almost all businesses.
Consequential Loss / Business Interruption
Provides payment for loss of gross profit (including increased cost of working, accounts receivable, payroll and rent receivable).
- Cover will respond following material loss or damage to property covered under a property policy
- You should always specify and adequate value for Additional Increased Cost of Working and Claims Preparation Costs to ensure your coverage will respond appropriately
The choice on whether to get this insurance or not comes down to how quickly you can get back on your feet after an event like a fire. If your business can start operating again straight away through hiring cars and equipment, outsourcing jobs like print and so on, then you may not require this insurance. Most businesses will want to do this straight away because being closed for a period will lose them custom. If this is the case, then the value of this insurance may not be realised in the event of a disaster.
However if you are a business that requires a specific machine or location and if those were not available, you would not be able to open again for a period, then you may consider this insurance as being necessary.
Public and Products Liability
Provides cover for amounts you become legally liable to pay in compensation for third party bodily injury and third-party property damage in relation to occurrences happening during the period of insurance arising out of your specified business operations Australia wide and worldwide in many circumstances.
- Numerous extensions are available to enhance the cover to suit your specific activities and exposures, e.g. Customers Vehicles / Driving Risk will provide cover for liabilities arising out of damage to Customers Vehicle in your possession or whilst you are driving them, this is not standard cover you need to explore the available extensions and arrange what’s right for you
This insurance is generally mandatory and you will not be allowed to work for many clients without it. The normal amount is $20M currently although $10M is sometimes acceptable.
Think of this like Third Party insurance on your car. It doesn’t cover your car (work in progress), It covers the damage you do to other people and their possessions.
Construction (Contract Works)
Provides cover in respect of exposures to loss or damage to materials on sites during construction and installation. Liability covers bodily injury or property damage to third parties and extends to include cover for certain contractual liabilities including counter indemnities, hold harmless or waivers of subrogation that may be contained in contracts for works which you may be signing with your clients.
- Note, “Contractual Liability” is a standard exclusion under general Liability policies
This insurance is often not required for a general Sign Company. It usually is something that Registered Builders undertaking large works will require. It generally relates to jobs that take longer than a few days and where a sign is partially built over a longer period. In these cases, the sign will be partially built and goods may be left on site overnight. For many sign jobs, the works take place in one day.
If you are asked to sign “Design and Construct” contracts with a client or Builder, then this might be necessary.
Professional Indemnity
Covering liabilities and the associated legal costs for claims made against you during the period of insurance that arise out of actual or alleged negligence from breaches of your professional duties, or acts, errors or omissions that may cause loss to others.
- If you charge separate fees for design or advice this type of cover should be considered due to the specific exclusion in this regard applying under Public and Products Liability policies
- Cover is provided on a “claims made” basis which means you need a policy in place when a claim is made on you or when you first become aware of a circumstance that may give rise to a claim in the future
This insurance is often not required for sign businesses. It is generally for people who offer advice without providing a good to go with the advice. Generally in the sign business, if you offer advice, you will then build an object and install it. In this case, your advice is generally covered by your Public Liability Insurance.
Professional Indemnity Insurance is generally for Engineers, Accountants and other professionals that only give advice and they do it as a paid service.
You may require this insurance if you are undertaking larger building jobs and are working with “Design and Construct” contracts.
You may be asked to provide this insurance as part of a contract supplied to you by a client. Just because they ask you for it does not mean that you need to have it. Speak to your broker first, but often you can cross this section out on a contract.
Management Liability
Covering the liabilities of individual directors and officers of your company arising out of actual or alleged breaches of the individual’s relevant duty of care in relation to the management of the business / Company. Also includes a range of liabilities that may arise on behalf of the entity.
- Cover can be included for a range of cost and expenses exposures for various breaches of regulations and the like, for example employment practices liability, crime losses, statutory liability and tax audit
- Cover is provided on a “claims made” basis which means you need a policy in place when a claim is made on you or when you first become aware of a circumstance that may give rise to a claim in the future
If it’s just you and your wife, then you may not need this insurance. But if you employ people, then this may be good insurance to have. Especially if you employ many people. This may cover you from unfair dismissal and in cases where one of your Managers bullies a staff member and so on. This might also cover you if an employee steals from you or their actions result in a Workcover or other legal claim through their negligence.
Machinery Breakdown
Covering damage to mechanical and electronic equipment and the associated consequential loss that results from mechanical or electronic breakdown or failure. Note, this is typically totally excluded under Property insurance policies.
Often this won’t be required if you can outsource your work elsewhere and continue on until a new machine arrives. However if a piece of machinery is integral to your business and you can’t outsource the work, or if outsourcing will be for a long period and make your business financially unviable, then you might consider this insurance.
Cyber Insurance
Covering damage to mechanical and electronic equipment and the associated consequential loss that results from mechanical