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One of the easiest ways to explain the different forms of business insurance is to look at a case study.
We plan of adding a number of different case studies to our website over the coming months, but to start with we’ll be looking at a small Brisbane-based professional services firm.
The firm in question is an insurance brokerage, however this case study will be relevant to any small business operating in an office environment.
The business in question would prefer not to be named, so for the sake of this case study we will simply refer to the business owner ‘Mark’.
About The Business
Mark’s business operates from a small leased office in Brisbane and employs four full time staff and one part time assistant.
The business had operated from a home office until last year when additional staff meant more office space was required.
Whilst the business is only young (established in 2010) and is still quite small at this stage, it has a growing customer base and is meeting many of Mark’s growth targets.
As an insurance broker himself, Mark fully understands the importance of insurance for a small business:
“Having worked in the industry for so long I have seen the consequences of not having the right insurance in place, and given what we do, we’d look pretty silly if something happened and we weren’t properly insured!”
Their Risks
Mark’s business faces many of the same risks as any other small business.
Some of these risks can be protected by insurance, whilst others cannot. Mark puts it like this:
“As a small business owner you have to be comfortable with taking risks. Giving up your reliable income to start a small business in the first place is a massive risk in itself.
“But just because I’m comfortable with risk does not mean that I won’t cover those risks where possible. If I can cover that risk without it costing too much, then it’s a no-brainer.”
Mark sat down with his own insurance broker last year to review his insurance needs. This coincided with moving into the new office space.
The following risks were identified along with solutions to cover them. We have added Mark’s own comments next to each risk.
RISK 1: Office contents and equipment is stolen
SOLUTION: Theft Cover
MARK’S COMMENTS: “This one’s pretty obvious. Although the office is well secured and alarmed it would be crazy not to be covered for theft.”
RISK 2: Office contents and equipment is damaged in a fire or other event
SOLUTION: General Property Cover
MARK’S COMMENTS: “As with the theft coverage this one is pretty obvious. We couldn’t afford to replace everything if it was lost in a fire or similar.”
RISK 3: External or internal windows are broken or damaged
SOLUTION: Glass Cover
MARK’S COMMENTS: “Although we don’t own the office our lease (like most others) states that we are responsible for any broken windows in the office.”
RISK 4: Personal injury suffered by others
SOLUTION: Public Liability Insurance
MARK’S COMMENTS: “We don’t get too many visitors to the office but when we do we certainly don’t want to risk someone injuring themselves and suing us.”
RISK 5: Property damage suffered by others
SOLUTION: Public Liability Insurance
MARK’S COMMENTS: “This probably isn’t too relevant for our business but it’s included in our public liability insurance at no extra cost.”
RISK 6: Personal injury suffered by staff
SOLUTION: Workers Compensation
MARK’S COMMENTS: “Here in QLD this is done by WorkCover QLD. It’s not part of our normal business insurance.”
RISK 7: Financial losses due to employee dishonesty
SOLUTION: Employee Dishonesty Insurance
MARK’S COMMENTS: “We made the decision not to take out this cover since we don’t handle any cash in the office but it’s something we’ll look at again at some stage.”
RISK 8: Unable to operate due to external interruptions
SOLUTION: Business Interruption Insurance
MARK’S COMMENTS: “I totally see the benefits of this insurance for a shop or cafe etc but we’ve decided to self-insure this risk due to the nature of our business.”
RISK 9: Financial loss suffered by a client due to advice received
SOLUTION: Professional Indemnity Insurance
MARK’S COMMENTS: “This is covered separately through an industry scheme but it’s probably the most important form of insurance our business has.”
RISK 10: Business owner unable to work due to injury or illness
SOLUTION: Income Protection
MARK’S COMMENTS: “I’ve had income protection for many years now. With a mortgage and other expenses it’s a must. This is looked after separately to my business insurance though.”
RISK 11: Poor business performance
SOLUTION: n/a
MARK’S COMMENTS: “No form of insurance can protect us against this! It is up to me as the business owner to make sure we are successful. At least with so many other risks insured I have fewer things to worry about.”
As can be seen in the table above, many of the risks faced by Mark’s small business have been protected against with insurance.
Although the coverage he has in place is fairly comprehensive, the insurance cost is quite minor relative to the company’s overall revenue.
It’s also worth noting that although Mark’s business is in a very specific industry, their risks – and the solutions to those risks – are generally no different to any other small business.
In summing up this case study we’ll hand over to Mark who probably puts it best:
“As a small business owner you work so hard to build something, and you really are risking a lot by choosing to go down this path rather taking the easy route of being an employee.
Insurance is mainly about protecting yourself against the unexpected; the things you cannot control yourself. I work very hard on the things that I can control, and it’s reassuring to know that my business insurance is there to protect me against many of the things I cannot control.”
For more information about small business insurance please contact us.