It is important to emphasise that there is no “one size fits all” when it comes to insuring your business. Every industry is different and so are the risks related to your business.
No policy covers everything, and every business requires a combination of business insurance for financial and legal protection against potential liability in a crisis. For example, a restaurant owner needs to consider about a customer becoming sick after a meal at the restaurant as well as a temporary shutdown in case of a disaster, while on the other hand, an accountant needs to consider being sued in case of a mistake occurred in a customer’s financial statements. The main role of insurance is when accidents happen, your business is protected.
It is important to determine what type of insurance your business needs to minimise all the potential risks. Buying the best insurance policy depends on your unique needs. It requires a careful and thorough analysis of your business and its risks.
Here are some steps to determine the type of insurance your business needs.
- Analyse your business assets and legal responsibilities.
It all starts with a careful assessment of your business and its assets to determine what do you want to insure. We need to take into account your legal obligations and potential liabilities. For example, a machine shop owner may want to insure employees for injury, whereas a jeweler might want protection against theft.
Common business assets include stock inventory, raw materials, cash (balance of your business bank accounts), equipment’s, etc.
With legal responsibilities Accountants and Tax Agents require professional indemnity insurance to comply with professional association requirements (e.g., NZICA, CPA), professional standards legislation, or to meet the requirements of clients and/or tender processes.
- Analyse potential risks.
Analysing your additional risk and liability will help you determine which insurance will offer the right type of protection. For example, if your business is situated on the bottom floor of an office building in a region prone to floods, you will likely want comprehensive flood insurance, whereas a business operating in a dangerous industry (construction, manufacturing goods, etc.) will likely want insurance to cover the risk of its employees getting injured.
Whether you own a business where you are a sole trader, contractor, or run a large company with multiple employees, you need to guard against work and business risks.
Typically, careful analyses of business operations and functions, including human resources and facilities which help determine where the risks are and what needs to be insured. Sorting out what your risks are involves answering two important questions of what could go wrong at work or with my business? and, have I got it covered?
Common business risks include fire or natural disaster (e.g., floods, earthquake), theft (equipment, or stock), stock damage, loss in transit, IT crime or hacking, injury or property damage caused by your products or services, product recall, employment dispute, health and safety breach, etc.
- Decide how comprehensive you want your insurance to be.
It all depends on what are you getting insured. You may need just a basic level of insurance or comprehensive insurance that covers all aspects of the potential loss.
You will need to determine the factor of how costly the loss can be and assess the probability if it happens. This will minimize the risk of overpaying for coverage you do not need or skimping on coverage that is imperative for your protection.
- Getting the right advice.
Insurance providers are not all the same. Policies, premiums, and coverage vary, research is required to find the best one to protect your business. It all requires professional help to set it up correctly and work out the right policy that will ensure your business stays afloat in times of unfortunate events.
At Aim Associates we work towards analysing the unique risks involved with your business and help you get the right policy that will cover those risks. We are proactive and transparent and provide expert advice to find the right combination of coverage to keep your business legally compliant and financially protected.
Key takeaway: To determine what business insurance you need, you will need to analyse your operations, assets, risks, and liabilities. Then, determine how comprehensive you want your policies to be.