If you’re starting a new business, or simply reviewing your existing needs, knowing what types of insurance you need is vital.
Running a business – small or large – involves multiple risks, and therefore multiple forms of insurance may be needed.
In this guide, we’ll take at which types of insurance are compulsory for a business, which ones are considered vital, and some which you should at least be aware of.
If you’re also professional advice rather than reading our guide, please call our office on 1800 808 800 to speak with one of our experienced business insurance brokers.
Insurance checklist
We’ll go much deeper in this guide, but to get started, here’s a quick guide on the types of insurance which may be needed for your business.
Types of insurance a business may need:
- Public Liability Insurance – Depending on your licensing requirements and state
- Public Liability + Glass Insurance – If you’re signing a lease
- Personal Accident Insurance – Required under some contracts
- Professional Indemnity Insurance – Depending on your occupation
- Plant & Equipment Insurance – If you have finance on your gear
- Workers Compensation Insurance – If you employ staff
Those are the types of business insurance that can be considered mandatory, but there are many other types of insurance that you should certainly consider.
In terms of their need, many types of business insurance can be viewed in a similar way to comprehensive car insurance.
Whilst comprehensive car insurance is not required by law, most of us know that it would be crazy to drive around without it.
Many forms of business insurance are the same. They might not be mandatory, but operating a business without them is not a good idea…
What insurance is compulsory for a business?
The answer to this question will depend on the type of business you are running, and in some cases, which state your business is operating in.
It can also depend on the types of contracts you are entering. You might find there is no legal requirement for a certain type of insurance, but the contract you are signing requires it.
We’ll break this section down into the different types of insurance.
Public Liability Insurance
When it comes to compulsory forms of insurance, and especially with public liability insurance, often this is driven by your licensing requirements.
For example, if you’re an electrician in Queensland, you’ll need to have public liability insurance along with consumer protection insurance.
Without these two, you won’t be able to obtain or renew your electrical contractor’s licence.
Many other Australian states have similar public liability insurance requirements for electricians, along with plumbers and certain other trades.
Most contracts in the construction industry will also include a requirement for public liability insurance.
If you’re subcontracting to someone else, you’ll most likely find that the contract will require public liability cover, and you’ll be required to provide evidence of your insurance.
For those businesses who are operating from leased premises, such as a workshop, warehouse or office, your lease will almost always have a requirement for public liability insurance, along with glass cover.
When it comes to the main types of insurance that a business needs, public liability will generally be at the top of the list.
Public liability insurance will cover your business in the event that you cause property damage or personal injury to a third party.
Professional Indemnity Insurance
Some professions will have a requirement to hold professional indemnity insurance. Whilst this generally isn’t relevant to the trades we deal with, it is for professions such as accountants and financial planners.
Other occupations more closely related to the trades might not have mandatory requirements for professional indemnity, but that doesn’t need you don’t need it.
If you’re offering any sort of testing or inspection service, or providing written reports that clients are specifically paying you for, you should have professional indemnity insurance.
Personal Accident Insurance
Whilst there is no legal requirement for any business owner to hold personal accident insurance, it is a common requirement within contracts.
Many contracts within the construction industry will require that all subcontractors and self-employed workers have their own personal accident insurance.
Even if your contracts don’t require it, as a self-employed tradie it’s so important to insure your income.
If you’re unable to work for a period of time due to injury or illness, you won’t be earning any money and you won’t have access to sick leave.
Personal accident insurance is an absolute must for any self-employed business owner.
Plant & Equipment Insurance
Plant and equipment insurance isn’t mandatory for any licensing reasons, but it may be mandatory if you have finance owing on the item.
If you’ve used asset finance to purchase any of your equipment (typically the big-ticket items) the finance company will require that the item is comprehensively insured.
When purchasing a piece of plant or machinery using secured finance, typically the finance company will require proof of the insurance before they settle the loan and release the equipment to you.
The insurance will need to specifically mention the finance company as an interested party.
This is the same if you are purchasing a house or a car using finance, and the lender will want to protect their investment by ensuring that the asset is properly insured.
Workers Compensation Insurance
Although we don’t generally deal with workers compensation insurance, this is another form of insurance that a business will need.
The rules vary slightly between the states, but generally this form of business insurance will be needed if you employ staff, and in some states, even if you don’t employ staff but are a working director yourself.
Other types of insurance a business will need
We’ve covered off the most commonly needed types of business insurance above, but your insurance package certainly shouldn’t stop there.
If we’re talking tradies, then tool insurance needs to be near the top of your list.
As a business owner, if you don’t have your tools to work you most likely won’t be able to earn a living.
By having tool insurance in place, you’ll be able to replace your gear relatively quickly and get back to work.
Car insurance is an obvious one if you’re using a vehicle in your business, which is pretty much every trade business!
It’s important that your car insurance specifically notes that your vehicle is being used for business purposes. If you’ve insured it as a private vehicle and you have an accident whilst working, you might have difficulty making a claim.
As your business grows you may find that it needs multiple other forms of business insurance.
By this stage you should have a great insurance broker who’ll be able to review your cover each year to ensure you have the insurance that your business needs.
Recap – What insurance does your business need?
In this guide we’ve covered off the main types of insurance that a business will need, or at least may need depending on your circumstances.
These are the five main ones, depending on the factors we outlined above:
- Public Liability Insurance
- Personal Accident Insurance
- Professional Indemnity Insurance
- Plant & Equipment Insurance
- Workers Compensation Insurance
With any of these business insurance types you could take the ‘DIY’ approach and set them up yourself.
We strongly recommend speaking with an insurance broker who understands your industry and can help to ensure you are getting the right types of insurance that your business needs.
Just because you know you need public liability insurance, doesn’t mean you know which options you might need, or which insurers are better suited to your business.
At Trade Risk we’ve been helping business owners for over a decade. We understand the trades, we understand the construction industry, and we certainly understand insurance!
Next steps
As insurance brokers we’re here to help in whatever way you prefer.
If you think you know what you need and just want some quotes, we can help you.
If you have no idea what you need, and you’d like one of our experienced brokers to run through everything with you, we can help with that too.
To take the next step in properly insuring your trades business, call us on 1800 808 800 or complete our online quote request.
We can help with all of the types of business insurance you need, as well as those which just make good business sense to have.
