How does business insurance work?

Insurance | May 2022

As a phrase it sounds marvellous, particularly if you’ve never actually tried it: ‘working for yourself’.

The truth is that running your own business can be one of the most challenging experiences that a person can undertake. It can also be one of the most rewarding.

Both running a business and going about your day-to-day personal life present their own set of unavoidable risks, but in terms of personal insurance and business insurance, there are some important differences to be aware of, such as:

  • Personal insurance has your name on the policy, whereas business insurance typically has the business name on the policy, unless you’re a sole trader. It’s important to know whose name is on the policy as it defines who is able to collect payment in the event of an insurance claim.
  • Business insurance usually covers more than personal insurance, including things like business furniture, tools and machinery and inventory.
  • Most businesses have a greater exposure to liability than most individuals, so the policy limits and insurance excesses for a business policy are higher.

In simple terms, business insurance works like this: a business pays a premium to keep itself protected, and if it encounters an unforeseen circumstance that’s covered in its insurance policy – such as property damage, theft, legal fees and costs involved with any other injuries or damage that has occurred within a business – the insurer will cover either a full or partial amount of the costs.

The greatest benefit from this is peace of mind. That is, knowing that if your business is hit with an incident that causes a financial loss, the right insurance will take care of you and make sure that you can recover and continue trading.

Business insurance policies run the spectrum from complex cover for large companies all the way to cover for self- employed professionals whose needs may not be as extensive.

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Disclaimer: These advertisements do not offer specific advice and you are responsible for your own decisions about financial planning, insurance and risk. All information presented is of a general nature, merely for informational purposes and is not intended as a substitute for professional and/or financial advice. Should you decide to act upon any of the information presented, you do so at your own risk.

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