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One of the issues often missed in the excitement and flurry of starting up a business is insurance. Registering a business name, getting an ABN and other essential licenses, opening a business bank account and finding premises are where the sole trader usually starts. They may know or have been advised to also take out public liability insurance in the event that something associated with their business causes injury to someone else. However, they are often so preoccupied with servicing their new customers/clients and running the business that other insurances are put on the back-burner to be addressed at a later date.

Unfortunately, insurance by its very nature is something that only becomes necessary after a major incident has occurred, and of course, then it’s too late. This can mean the difference between a fledgling business surviving or going into bankruptcy, as the costs associated with the incident are impossible for the owner to cover. Along with tax and accounting advice, many accountants also have qualified advisors who can provide information about insurance, so this is a good place for the new business owner to start.

Apart from public liability insurance, the next important policy to take out is income protection insurance. As its name indicates, this type of policy is designed to replace the income of the business operator if that person is unable to work. The owner’s capacity to earn an income is not only vital to the ongoing operation of the business, but also to any family dependent on the income from that business. A mortgage, car loan, household debts, school fees, daily living expenses, all these commitments require a regular income, and income protection insurance provides this.

It is almost a given that a business owner should have life insurance, for many of the same reasons that they should hold income protection insurance. The difference of course, is that life insurance is only payable on the death of the insured, and as tragic as the situation may be in the short-term, having that insurance can give the family the time they need to make more permanent decisions. Business protection insurance covers more scenarios again than the others just mentioned and is designed to protect the equity the owner has in the business. It can cover situations such as being in a partnership and having one partner die or become too ill to work the business. The policy will provide funds to buy out the interests of the deceased or departing partner while at the same time, protecting the interests of that partner.

These are just some of the scenarios and threats that can cripple a business that has not prepared for them by arranging the appropriate insurance policies. If you are a business owner who has not considered some of these measures, your accountant is a good starting point.

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