Starting out can be both exciting and daunting. Thinking up a business plan, finding clients and projects, and office space is first and foremost on your mind, and insurance is often overlooked. We recommend the following insurances and offer some tips when taking them out.
Professional Indemnity Insurance (PI): PI insurance covers you for claims brought against you by your client and third parties for negligent advice or services, as well as the legal costs associated with defending the claim. As a professional it is imperative that you take out PI insurance which covers your professional activities, before you start working on your first project.
These policies have a retroactive date applied to them which is often the date you take out your first PI Insurance policy. Any work done prior to the retroactive date will not be covered. As long as you maintain PI insurance you carry the same date from policy to policy and insurer to insurer.
We are often asked “how long do I need PI Insurance?”. Well the answer is “as long as the entity exists” – and then some to cover lengthy limitation periods. If practicing as a sole trader, you personally are the entity, and therefore the professional risk sits with you “as long as you exist”. From a risk management and insurance perspective we recommend setting up a business entity name in the form of a Pty Ltd Company. The company structure can provide you with greater protection than a mere business name. When the Pty Ltd is shut down and no longer exists, we would recommend run-off cover for at least 12 months, longer if you can. Some insurers will offer multiyear run-off policies at a discounted rate.
Public Liability (PL): PL insurance can protect you against the costs of being sued for personal injury or property damage caused by you and your actions. There is often a misconception that you don’t need PL insurance if you don’t have an office and clients visiting that office. But in your business it’s likely that you will be performing site visits, or meeting in coffee shops or the like, which is considered your workplace, so PL needs to be held even if you don’t have an office or have a home office.
Office Pack Insurance (OPK): If you have an office it’s likely to contain valuable equipment like computers, printers, iPad and mobile phones. Should these be stolen or damaged, the costs associated with replacing all your equipment could be in the tens of thousands and will be covered under the OPK contents. However, if you travel with your laptop and it is stolen or lost outside of the office, it is important to know that unless it’s specifically listed under general property (portable items cover), it will not be covered away from the office
Read your lease agreement well as you may need to cover glass breakage yourself under that agreement, and it is not automatically covered under contents insurance. Glass cover is a separate section which may also need to be taken up.
Income Protection (IP): As a small business you are the business, and if you can’t work due to sickness or injury, IP insurance would cover your monthly remuneration or share of the business while you cannot work. Your IP insurance may be covered under your Super Fund, this is likely to be cheaper but probably provides less cover and options. Review it. How long is the waiting period? Can you wait that long?
Once you are satisfied with your coverage, it isn’t over. You should regularly evaluate your policies with your broker as your business grows. Employees, changes to your activities or even state regulations could impact what types of policies you need. You may need to also consider Workers Compensation, Management Liability and Cyber Risks Insurance.
We are here to assist you. Contact us for more information on insurance for your business needs. Visit us at https://plannedcover.com.au/team/ for your local expert in your relevant state.
Carina Bogaard
Senior Account Manager NSW/ACT
