Do you know aboutyour insurance coverage? Thanks to the year that was, small businesses have encountered many challenges, making it important to know what your insurance covers in 2021.
“Research by online lender OnDeck Australia shows 86% of small businesses have been impacted by Covid-19, with one in two severely affected. Many owners may assume they’re covered by insurance. The reality, though, could be different.”
Covid-19 highlighted that one in four small businesses had no means of insurance to cope with the aftermath of a pandemic. What’s even scarier is that 87% of owners agree that a liability claim could put them out of business.
Do you have insurance for your small business?
Unfortunately, many businesses have discovered that they are not directly protected against a pandemic. Business Interruption Policies (BI policies) were a lifeline for many during the Australian bushfires last Summer. However, as a rule, infectious diseases are excluded from BI policies.
It was noted from the Business Council of Australia that some businesses had specialist cover (specifically written for that business). This specialist cover offered protection against disruptions to critical supplies from overseas or a sudden drop-off in trade due to specific border closures.
If you are unsure of what your insurance covers, 2021 might be the year to find out.
Cutting back on costs? Should you keep your insurance going if it didn’t cover your losses?
Insurance can seem like a non-essential expense if it didn’t provide any cover in the aftermath of a crisis. However, there may be good reasons to hold onto your policy.
“Insurance still provides valuable protection against other business related risks, and having cover in place can ensure the long-term survival of the business,” says Michael Gottlieb, managing director of Bizcover.
For example, if your business has temporarily shut its doors, insurance will still protect the value of stock and contents in the event of a break-in or fire.
Other business associated risks that you may want to seek coverage for in 2021 include:
– Cyber Attacks – The average cost of a cyber incident in Australia is more than $250,000. If your team is working remotely thanks to COVID 19, cyber insurance is worth a look.
– Management Liability – This sort of cover can be particularly useful if your business starts to make staff redundant further down the track. This can bring into question issues around unfair dismissal, and other legal risks to managers and directors.
– Trade credit cover –This protects the cash flow of a business by covering any losses that can arise if a debtor defaults or becomes insolvent.
– Key person cover – If a key equity owner or employee falls ill and is unable to work again or the impact on the business can be devastating. Whilst a pay-out from key person cover will never compensate for loss of a valuable employee to a business, it can be a financial lifeline for a small business.
– Tax audit insurance – If you are audited for any reason, this insurance will cover the costs of accountants and other professional fees incurred in the course of a taxation audit.