An annual insurance health check is all part of being in business and a new year is a great time for this important task.
So here are some tips for making sure your risks are covered in 2022.
Step one – assess your risks
A business risk assessment involves mapping out the risks and potential hazards a business faces and their consequences. The Australian government has provided information to assist your business during the risk assessment process.
“The first step is to identify anything that may cause harm and list the risks your business may encounter. From there, analyse the risks, determining who and what could be harmed and ranking them,” says Leah Oliver, a chartered accountant with and founder of Minnik Chartered Accountants.
After you’ve done a risk assessment, put in place management strategies such as disaster recovery plans, emergency management, health and safety procedures and invest in essential insurances.
“Self-insurance relies on a business or individual properly understanding, planning, managing their risk levels”
Step two – put in place the right cover
Small businesses often overlook the importance of adequate insurance cover, due to lack of funding and resources, yet they are most at risk due to the potential inability to survive any major negative event. So work with your accountant, lawyer and insurance broker when sourcing the right insurances for your business.
“These professionals can also advise you on the best business structure to trade and invest through, to protect your assets, yourself and your family,” says Oliver.
Unless you don’t employ anyone, you will need to take out workers’ compensation cover, public liability insurances for third party personal injury or property damage, and other third party personal injury insurance such as compulsory motor vehicle insurance.
“Other essential insurances include stock, products and asset insurance, such as building and contents, equipment and theft insurances. Product and management liability and professional indemnity insurance is also advisable in businesses where the risk of legal action is high,” she adds.
Davie Mach, client manager of chartered accounting firm Box Advisory Services says it’s a good idea to seek your insurance broker’s advice when assessing and prioritising risk.
“They know the right questions to ask to assess risks relevant to your business or industry. They will also look at the likelihood of risky events occurring that would result in your business being affected,” he says.
Step three – be smart about self-insurance
Self-insurance relies on a business or individual properly understanding, planning, managing their risk levels, and maintaining adequate funding provisions to remedy unexpected loss. If an insured risk befalls a business, paying for it can also be a huge and even fatal blow to cash flow.
“Self-insurance is suited to low severity, low impact and more predictable risks, where you can reliably predict the extent of loss over time,” says Oliver. “Any risk of injury, health, safety, lawsuits and where negative impact hard to predict and expected to be significant are generally best properly insured,” she adds.
Don’t forget the business’s risks will change as it pursues new opportunities and enters new markets, other reasons why an annual insurance review is a must.
So now’s the time to meet with your Steadfast broker to help make sure all your risks are properly insured for the new year.
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