Public liability insurance
Business interruption insurance
Home Business insurance

Securing adequate insurance cover may assist in minimising the impact a crisis has on your business. Insurance cover may enable you to be reimbursed for costs to your business as a result of an emergency, according to the type and value of cover.

For a small business, adequate insurance cover can mean the difference between a business surviving a crisis or your business closing.

Some types of insurance cover are required by law, such as third party car insurance and workcover, but other insurance is voluntary. In deciding which policies, and what level of insurance to take out, a business needs to:

• Decide on the critical areas of cover to remain competitive with other tourism businesses. For example, some contract services, such as running tours for schools or delivering corporate event management, may require some types of insurance to be in place, including public liability and professional indemnity.
• Decide on how much the business can afford to pay for insurance without impacting on profit targets.
• Assess whether the business has adequate back-up for key personnel, in the event of injury or other absences. If so, you may not need key person insurance.
• Set a budget for insurance premiums after receiving advice and quotations from brokers or agents.

An insurance broker who is experienced in business insurance may be able to help you undertake a risk assessment to identify the parts of your business that are most vulnerable and critical to your business continuity plan. The cost of insurance cover may be cheaper if you have undertaken a risk assessment and developed a risk management plan.

It is also advisable to research the products provided by a range of insurers to ensure you get the one that’s most suited to your business needs.

It is recommended that you read the Product Disclosure Statement carefully to ensure you understand exactly what your insurance policy covers and under what circumstances.

Public liability insurance

Public liability insurance protects your business against legal liability for any damage or harm caused by your business to customers or the public. A single compensation claim can be high enough to cause your business to close.

Public liability insurance to the value of $10 million is standard in the tourism industry. Your insurance policy should note the range of activities you provide in your business. Also, if you subcontract any activities, you should ensure that your contractors have adequate Public Liability Insurance cover.

Business interruption insurance

Business interruption insurance provides compensation to a business for any reduction in profits that occurs as a result of an interruption to the business, such as a natural or manmade disaster. This kind of insurance is additional to basic property insurance, but for revenue losses to be covered, they must be seen to be a direct result of the type of property damage covered by your policy.

The insurance helps to ensure that:

• anticipated net profit is maintained
• continuing overheads are paid
• key employee wages are paid
• in some cases, additional working costs may also be covered.

Keep in mind

Some Victorian tourism operators discovered, after a natural disaster affected their business, that they did not always have the level of cover through their business interruption insurance that they thought they had. General policies will cover you for interruption to the business if your property is damaged and you cannot trade. However, in the instance where roads to your business are closed to traffic and visitors cannot get to your business, some policies will cover the resulting loss of trade and others will not. This is particularly relevant when areas are affected by bushfires, floods, mudslides, etc.

Consultation with insurance advisors has indicated that operators should look carefully at the fine print in their business interruption insurance policy and find out exactly what they are covered for. Most comprehensive policies would cover an insured business under both instances.

To make a claim, insurers would require an examination of your business financials and, for a claim in the instance of road closures, confirmation of the level of inability of customers to get to your premises (e.g. evidence that roads were blocked by authorities, roads dug up, etc).

Home business insurance

For tourism operators who run their business from home, it is worth noting that a home insurance policy may not cover your business operations. For example, it may exclude:

• public liability for customers visiting your home
• replacement of business equipment
• replacement of damaged or lost stock
• damage or loss of goods in transit

Find out from your insurer or insurance broker if you need additional cover. It may result in higher premiums or a request to upgrade certain services in your home, such as adding a safe. However, if you don’t discuss it with your insurer, it may render your policy invalid.

What do you need?

To help determine which insurance you may need to protect your business, review the Business Insurance Checklist in the Resources section to see which may be relevant to your operations. Obtain quotes before deciding whether the risk justifies the insurance cover.