Business insurance is classified as either compulsory or non-compulsory.
Compulsory business insurance
Depending on your industry, your business may be legally required to have specific insurance.
Common examples include:
- Compulsory third party (CTP) insurance: required if your business operates vehicles (typically included in vehicle registration fees).
- Public liability insurance: covers compensation costs if your business is responsible for property damage or injury to a third party. Public liability insurance is usually optional; however, in some situations it may be compulsory.
- Workers’ compensation insurance: mandatory if you have employees.
- Industry specific insurance.
Be sure to seek professional advice to help you figure out which compulsory insurance applies to your business needs.
Compulsory third party (CTP) insurance
All cars and motorbikes require CTP insurance for business and personal use.
You can choose your insurer when registering your vehicle, or you may be covered by the compulsory third-party insurer included in your current vehicle registration.
Public liability insurance
Public liability insurance protects you and your business if you are required to compensate a third party for injury or property damage.
It may cover:
● Injury or death, such as food poisoning.
● Emotional distress when caused by your business activities.
● Property damage, such as your business accidentally causing a fire.
● Consequential loss, in which your negligence results in another business losing expected revenue.
Workers’ compensation insurance
Workers’ compensation insurance is mandatory for all employers and provides coverage for employees injured at work or those who develop a work-related illness. It is a vital safety net that protects both employers and employees.
It includes payments for:
● wages while employees are unfit for work
● medical expenses
● rehabilitation to support recovery.
Industry specific insurance
Professional indemnity insurance covers your business if you provide professional advice or services and a client suffers a loss due to an error or omission on your part.
It is compulsory for many licensed professionals, such as, but not limited to, accountants, architects, healthcare professionals, engineers, marketing and IT consultants.
Other common types of business insurance
Non-compulsory insurance, while not legally required, can help protect your business. The type and level of insurance cover you need will depend on your business activities.
Common types of business insurance
● Personal or loss of income insurance.
● Stock, products and asset insurance.
● Management liability insurance: covers directors, officers and managers for claims against your management practices. It also protects your assets if these practices cause losses to people or businesses.
● Product liability insurance: protects against claims if your product causes injury or damage. Important for manufacturers, food businesses and retailers.
● Property damage: covers your property in case of natural disasters and/or vandalism.
● Burglary and theft.
● Natural disasters.
● Technology and cybercrime insurance: protects your business from the cost of cybercrime, and electronic items from breakdown, loss or damage.
Find out more from the Australian Government’s website on business insurance
