5 types of Trade Insurance you’ve never heard of (but might need one day)
Every trade business owner will be familiar with the most common forms of trade insurance.
Whilst you might not be an expert on each one, you certainly will have heard of policies such as public liability, tool insurance, contract works etc.
But what else is out there that could be protecting your trade or building business?
As the owner of Trade Risk, one of my worst nightmares is that one of our clients loses everything – I’m talking their business, their home, their assets, even their relationship – and we tell them something like this:
“Oh you should have asked us, you could have insured against that for two grand a year.”
I’m sure we’d deliver the message with a little more sensitivity, but you get the idea.
But we don’t get the chance to tell every single client about every single form of business insurance before they suffer a loss.
The challenge is that some clients think we’re just trying to “upsell” them. Not all tradies and builders treat their insurance the same way. For some it’s an expense they wish they didn’t have, and they just want the minimum to get by.
But thankfully not all clients feel that way. Many of you do care about properly protecting the business assets you are working so hard to grow.
If you fall into that category, here are five types of business insurance you might not have heard of, but could find quite interesting…
Legal Expense Insurance
One of the greatest risks we face in business is that of other parties taking legal action against us.
Worst still, where that legal action follows us doing nothing wrong, but we have to spend thousands (or tens of thousands) of dollars defending ourselves.
Here at Trade Risk we’re lucky to have never faced that in our 10+ years in business, but it’s always a possibility.
There is a policy known as legal expense insurance that can cover your legal fees in a wide range of cases.
This policy shouldn’t be confused with the “legal expenses” option which can be added to some public liability policies. That cover is quite limited and not nearly as broad as a stand-alone policy.
We’re still working on a full article which goes into greater detail, but here are a few of the items a legal expense insurance policy can cover for a trade business.
Note that the policy is only covering the legal expenses relating to each item. Not any other types of loss.
- Criminal prosecution defence
- Property and goods
- Identity theft
- Statutory licence
- Compliance and regulation
- Tax audit
- Contract disputes
- Tenancy disputes
- Debt recovery
Not all of those issues will be relevant for every trade business or builder, but certainly a few of them will be.
The peace of mind that a legal expense policy can offer is that if you are dragged into a legal case, the cost of legal representation can be covered.
Some policies also cover legal action initiated by you, rather than simply responding to action initiated by others.
So if you have an issue with another person or company, you can initial legal action and the policy may cover your legal costs depending on the situation and your policy coverage.
Contractual Liability Insurance
Any tradie or builder will know what public liability insurance is, but what about contractual liability insurance?
The two are somewhat similar, but with one massive difference…
Public liability insurance covers you when you are responsible for property damager or personal injury to a third party resulting from your negligence.
So basically you stuffed up, it caused damage or injury to a third party, and your public liability will cover it.
Your public liability won’t cover you if you weren’t negligent, or to put it another way, you didn’t stuff up.
That makes sense right? Because if you weren’t negligent, then it’s not your fault and you shouldn’t be responsible.
But you can be responsible for something without being negligent or at fault. The reason…
Contracts!
And that’s where contractual liability comes into it.
Some contracts you might sign as a trade or building business owner will pass down responsibilities from the contractor above you. In turn, they might have responsibilities passed down to them from the head contractor or principal contractor.
So through those contracts you could end up being responsible for a whole host of things which might be outside of your control.
If something goes wrong on site and there is property damage or personal injury suffered by a third party, the contract you signed might make you financially responsible for the incident, even though you weren’t negligent in any way.
Your public liability policy will not cover the claim, so unless you hold a contractual liability policy, you could find yourself in serious financial trouble.
For more information about contractual liability, as well as a great case study which will help to make it all click, check out our contractual liability insurance guide.
Directors and Officers Insurance
As a business owner you’re likely have the right types of trade insurance in place to protect the assets of your business, but what about the personal assets of the people running your company?
We’re not talking about insuring your home and cars, but insuring you – or your fellow directors and senior managers – in the event that you are personally sued whilst acting in your capacity as a director or officer.
As company owners we often think of our personal assets being quarantined from our business, but that’s not actually the case.
There are indeed cases where we can be held to account personally for decisions made in our business, as this quote from DUAL emphasises:
“Company Directors, Officers and Senior Managers operate in a complex regulatory environment in Australia. There are over 650 individual legislative provisions in force in Australia at present which attract personal liability for directors, officers and managers of corporations.”
Broadly speaking, the policy will cover you in the event that you make a decision in your capacity as a company director or senior manager that leaves you open to personal legal action.
The policy isn’t something we’d ever expect a sole trader to consider, but if you’re operating as a company and getting to that 5-10 staff number it’s certainly worth knowing about.
We don’t have a more in depth article about D&O cover, but one of the insurers we use, Vero, has this article worth checking out.
Management Liability Insurance
If you’ve read this far into the article I would strongly suggest speaking to one of our insurance brokers for an in depth conversation!
These types of insurance can be quite complex, and you really need to be speaking with a professional about your personal situation rather than relying on a generic article.
I won’t go into great detail on management liability insurance, but it is similar to D&O insurance, whilst covering all staff rather than just the directors and senior management of the business.
It is a much broader coverage compared with D&O, but again, I strongly recommend speaking to one of our brokers rather than relying on this (or any other) article.
Cyber Insurance
It would be wrong to say that tradies and builders would never have heard of cyber insurance, as it has been a hot topic amongst business owners for a few years now.
But it probably is fair to say that most tradies and builders wouldn’t have thought cyber insurance was something they really needed to consider for their type of business.
After all, is someone going to hack into your power tools and disable their operation until you pay the ransom? Probably not!
But if you’re storing customer information on file, or payment information, or any other information that is either sensitive or vital to the running of your business, you need to think about how it is protected.
It’s not enough to rely on Office 365 or Google Workspace to protect all of your emails and documents stored in the cloud from being hacked and held to ransom.
Like some of the other forms of insurance we’ve covered in this article, cyber insurance probably isn’t something we’d expect every sole trader to go for, but for slightly larger businesses it is at least worth knowing about.
More information
None of the insurance types listed in this article would be considered DIY. You’re not going to find an instant online quote that you can simply buy online.
You need to speak with one of our qualified insurance brokers who can run through the ins and outs of the policy and understand how that fits with your business operations and risks.
We might tell you that it’s not quite relevant for your business, or we might tell you you’re crazy to operate your business without it! But more so we just want you to be informed and know what you can insure for.
It really is about ensuring you are informed. We don’t employ “salespeople” and we’ll never try to “sell” you a policy, but we do want to make sure you know what is available to you.
It goes back to what I said in the opening paragraphs of this email…
The last thing we want is for you to suffer a loss in your business, only for you to find out later that you could have insured against that risk.
And worst still, that we knew you could, but had never told you about it…
If you’re serious about your trade or building business and value what you have created – both personally and within the business – then I can’t stress enough the importance of properly insuring it.
Don’t just get the basic insurance policies because that’s what every other tradie or builder does. You wouldn’t be in the great position you’re in if you just did what everyone else does, right?
People who own and operate big businesses insure themselves properly, and there is no reason why your trade or building business deserves anything less.
Get in touch with your Trade Risk broker for more information, or if you’re a new client please call us on 1800 808 800 to get started.
