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What insurance does my small business need?

Published 22 February 2022

Insurance can be considered crucial for small businesses as it can provide valuable support for many potential negative impacts and can represent the difference between survival or closure in crucial times. Small business owners are often highly vulnerable financially, especially if you have sunk your life’s savings into a venture or taken out a substantial loan. 

The first step to protecting your small business and your personal exposure is to identify what could cause a negative impact to your business, taking time to understand and identify your business risks.

Small businesses are faced with barrage of options and decisions on how to operate, grow and work smartly in constantly changing cycles. The one thing you can count on is that your business and the challenges will constantly change. For that reason it’s important to look regularly at what might present a threat – at least once a year, and importantly, before you renew your insurance cover. 

This information is intended to help demystify confusion and provide guidance on the insurance basics a small business can utilise for protection. 



Key risks and small business insurance essentials

When thinking about what could negatively impact your business, it’s useful to start by identifying the things that you can control because you can take steps to prevent them or to limit their effects. This is worth doing as it can help reduce your insurance premiums if you can demonstrate risk mitigation measures.

The most common risks to small businesses include 

  1. cash flow issues
  2. employee management and mandatory protections
  3. loss of a key staff member 
  4. liability for injury or damage
  5. regulations and compliance obligations
  6. cyber risks, scams and online risks
  7. fire and natural disasters 
  8. theft
  9. breakdown of machinery or equipment 
  10.  interruption to trading.

Cash flow is critical
Half of all Australian businesses fail in the first three years of operation, and poor cash flow is a factor in 40% of cases, according to insurance industry data. To protect monetary loss and risk you can insure against theft, both external and by an employee, and if you are concerned with creditor payments you should also consider taking out trade credit cover against non-payment of monies due to your business.

People who are indispensable
If you have a staff member who is critical to your operations you should havea contingency plan to cover for them if they are unexpectedly unable to perform the job. You can also consider key person insurance that helps cover the costs involved with recruiting a replacement and employing a temporary replacement.

What happens if someone takes legal action against you or your small business?
If you provide consulting or design services or professional advice, or someone outside the business is injured or their property is damaged as a result of your business activities, they can bring a legal action against you. Errors made while providing services or advice is covered by professional indemnity insurance, and injury or damage is covered by a public liability policy. Both pay expenses involved in answering a legal claim and may also help with reputational damage control costs.

Keeping up with regulatory changes
Small businesses are particularly concerned about changes to regulations and statutory requirements because adapting to them can involve disruptions to operations or, in worst case scenarios, penalties or fines for failures to meet them. Management liability insurance provides protection against the legal costs involved if there is a legal action brought against you in your capacity as a director or manager of your business and staff employment issues such as unfair dismissal claims. 

Technical business issues and cyber security
Increasingly prevalent attacks by cyber criminals can bring businesses of any size to a complete halt. Staying on top of technology safety with strong cyber security measures may need to be coupled with cyber insurance because hackers are coming up with new ways to steal money and information every day.

When disaster strikes
Catastrophes and extreme weather events are also increasing in frequency. In addition to risk reduction actions ensure your property damage cover is up to date and realistically provides for total replacement costs if your premises are destroyed. Don’t forget to factor in demolition and debris removal. 

If you have to suspend business 
Small businesses can understand all of the above risks and still overlook one of the biggest. Business income protection covers your business for running costs and wages for a nominated period if you’re forced to close due to an insured loss, giving you the resilience to bounce back. 

Keep your wheels turning 
Regular maintenance of your machinery or equipment is a given, but it’s wise to think about insurance against your essential plant failing and resultant deterioration of stock. 

Don’t forget your people

Every team member is especially important to a small enterprise so ensure you understand your workers’ compensation obligations and have the right cover for your permanent staff and casuals. 

How a broker can help you with your business insurance

Working with a broker to understand your business risks can help you to identify the right insurances to mitigate your risks. We have Gallagher brokers nationally across small to large businesses, in all industries, to provide professional expertise.

Further reading


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Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.
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