As a small business owner you’ve probably spent a great deal of time and money to ensure success. You might have sacrificed things and taken risks to turn your idea into something tangible. You may have chosen to do your own bookkeeping, develop your own website and man your own phones in a bid to reduce costs. And you might even be thinking that insurance is just another cost that you can afford to forgo. But have you considered the true financial impacts? Read the rest of this entry »

Insurance for your business is quite often a one-sided thought: what happens if my place burns down and I lose my property, what happens if I cause a car accident and damage someone’s shiny brand new Mercedes? But the reality is that insurance is as much about protection for your own business as it is for your customers.

Consider the earlier cases of public liability: you’re a graphic designer and one day a visiting client trips over a box of Reflex paper that you had been reminding yourself to pack away all day! If your policy provides protection for personal injury under the public liability section then it will almost certainly be covered. You don’t have a spare $50,000 for physio treatment at your disposal so you would be able to give your client some comfort that the insurer will be able to pay the claim (of course, after you have checked your policy wording or PDS). Indeed, your client is then able to return to work much sooner rather than later..

You run a small legal practice and have a paperless office (dream come true?) that demonstrates your green credentials. A fire breaks out during morning tea in the staff room, melting down critical parts of your computer system. You didn’t have time to set up an online data backup service. Your policy happens to cover the costs of restoring data and you know that you can be back up and running again within a few days. This gives you enough time to respond to your client on an important matter without damaging your reputation. You respond to your client who can proceed on that matter.

You operate 041-PET-GROOM which reflects your mobile phone number. You’re on the road all day so don’t see a need for a landline and you certainly don’t have time for emails. One day, whilst giving a Maltese terrier a scrub-down, your iPhone slips out of your top pocket and into the doggie bath. Another client of yours Mrs Makeltoe, runs a small dog-breading company and is dependent upon you to prep her new pack of Doberman pinschers for a show that she will be doing towards the end of the month. The organisers decide to bring the event forward by one week and she is desperate to get in touch with you. Was your mobile phone insured? How quickly can you get a replacement?

Of course, only you know your business better than anyone else and only you will know what sort of risks you can take – will you operate a catering company without public liability or take out property insurance but no insure your specialised business equipment? Sure, you might have good reasons for doing that but have you considered the risk to your clients as well?

So, you sell widgets online – your customers browse your virtual aisles filling their virtual shopping carts with your widgets. Your customers are happy shopping from the comfort of their own home, internet café, during work or from where ever they might be. If something goes wrong in this virtual world you’ll be virtually ok right? Wrong.

Just because you don’t have direct contact with you customers doesn’t mean that they can’t make a claim directly against you. Even if you don’t manufacture the widgets yourself, often the mere act of distributing these widgets could be enough for your customer to make a claim against you.

Let’s take a closer look at a typical small business insurance policy wording – for example the NRMA Insurance PDS. Here we find the following definitions:

Product liability: liability for personal injury or property damage arising from your poduct…
Personal injury: bodily injury, sickness, disease, disability…
Property damage: physical loss, destruction or damage to tangible property…
Your product: anything (including any packaging, containers, directions, warnings, specifications…) manufactured, grown, extracted, produced, assembled, assembled, serviced, sold, supplied, distributed by you or for you…

So NRMA Insurance seems to think that you could potentially be liable. But is this enough to put your mind at rest? Well, only you can tell as after all it is your business and you should be comfortable enough reading the fine print of your insurance policy unless you seek professional help. Check our quick guide to insurance for business as a starting point.

What we can tell you is that quite often, retailers (whether online or not) can get dragged into court cases where the lawyers not only go after the product manufacturer, but everyone in the food chain – from the logistics company to marketing company and ultimately to yourself. Should you have warned your customers that certain versions of your widgets could potentially be harmful if used inappropriately? Should you have verified the age of the purchaser before selling them your widgets? These are all questions that could arise depending on the nature of your business. Of course, selling certain types of widgets to potentially underage consumers might actually be a direct liability to your business.

But even if a court finds that you aren’t liable, you’d still be stuck with legal bills wouldn’t you? So it pays to find out from your insurance company whether your liability policy will provide this cover.

What sort of widgets do you sell anyway? We’d love to hear all about them!