Insurance

Insurance 

Insurance protects businesses in the event that something goes wrong. There are many types of business insurances which may be of benefit, depending on the industry, the type of business and the size of their operation.

There are two types of insurance which are compulsory for Australian businesses: workers' compensation and compulsory third party insurance.

What is sole trader WorkCover insurance?

WorkCover, also known as workers compensation insurance, is compulsory for sole traders with employees. IT usually offers your employees first aid cover, workers’ compensation and return-to-work rehabilitation benefits.

Every state and territory protects employees in the event of an accident or sickness by offering workers compensation. As the states are free to determine their own regulations in this area, businesses must refer to the government resources which apply in their jurisdiction:

• ACT
• NSW
• NT
• QLD
• SA
• TAS
• VIC
• WA

Do I need workers compensation insurance as a sole trader?

As a sole trader, you can’t cover yourself under your own workers compensation policy (unless you can be legally regarded as a working director).

This is why it’s important to consider alternative income protection policies to cover you if you are unable to work due to sickness or injury.

What is compulsory third party (CTP) insurance?

Compulsory third party insurance covers claims made against a person or business for personal injury resulting from the use of a company vehicle. CTP insurance is required to register a vehicle, though most businesses choose to take out a higher level of insurance which covers damage to property or damage to their own vehicle..

Each state has their own compulsory third party insurance regulations:

• ACT
• NT
• QLD
• SA
• TAS
• VIC
• WA

What are common types of business insurance?

In addition to the compulsory insurances, there are many options available to protect business assets and income. These include:

• Professional indemnity insurance: protects businesses from the costs of legal action taken against them by people who suffered losses when relying on their professional advice or services.
• Property insurance: covers damage to buildings and other properties caused by accidental damage or pre-approved ‘insured events’
• Public liability insurance: covers legal costs and compensation if a business is found to be liable for a member of the public’s death, injury, loss of property or economic loss
• Product liability insurance: covers legal costs and compensation if a business’ products are found to cause damage, injury or death.
• Theft and burglary insurance: covers losses sustained when someone steals from a business or damages their property while trespassing (this does not usually cover stolen cash)
• Money insurance: covers cash which is stolen from a business.
• Commercial vehicle insurance: third party insurance is required, but can be upgraded to cover property damage, fire and theft or be fully comprehensive.
• Tax audit insurance: covers costs which may be incurred by a business when the ATO conducts an audit or tax investigation.
• Business interruption insurance: covers losses a business sustains when they cannot continue work due to an insured interruption, which typically includes flood, fire and weather events.
• Stock insurance: covers businesses for losses they incur due to stock deterioration and spoilage.
• Glass: covers the cost of replacing external and internal glass.
• Employee fraud insurance: covers losses sustained due to the fraudulent or dishonest actions of an employee.
• Machinery/Equipment insurance: covers replacement or repair of machinery and equipment in the event of a breakdown. Some policies also cover damages sustained due to those breakdowns.
• Property in transit insurance: covers losses sustained by a business when their assets, equipments or products are in transit.
• Computer and electronic equipment insurance: covers losses sustained due to accidental damage to either computer hardware, electronic equipment or data

Do I need insurance as a sole trader?

As a sole trader business, you are not legally required to take out an insurance policy. However, if you employ staff it is a compulsory requirement to take out a workers compensation insurance policy to protect your employees.

What insurance is recommended for sole traders?

Although sole trader insurance is not essential, it’s highly recommended to take out an appropriate policy for the smallest of risks to help you cover the costs in case something went wrong.

There are typically three main insurance types for sole traders:

• Liability insurance: Liability insurance is important if there is a risk that people will injure themselves due to your business or if you could damage third-party property. For example, if you are a plumber liability insurance will protect you if you damage a client's bathroom.
• Professional indemnity: Professional indemnity insurance is vital for any business that provides professional advice as part of their service. It protects you from any damage or problem that arises from advising clients.
• Business protection: Business protection covers you for costs incurred as a result of your business being interrupted due to things like damage, theft, fire, etc.