SMEs urged to consider business insurance to mitigate financial risks

A single “bad luck” incident could cause financial disaster for many Australian small businesses.

In a recent survey conducted by Prospa and YouGov, 22 per cent of respondents reported having zero cash reserves, and another 21 per cent predicted that they would run out of cash within two months.

Spurred by inflation and high interest rates, SMEs face persistently challenging trading conditions. Many households continue to restrict their discretionary spending, particularly in areas where many small businesses operate, including retail and hospitality.

But as small business owners look for ways to cut costs, it’s crucial that business insurance remain a “must have” budget item.

Managing risks - and averting disaster

Amid this difficult trading environment, online small business insurance service BizCover reminds SMEs of the importance of business insurance.

Mitigating risk is a large part of running any business. While careful planning and due diligence can help SMEs avoid many common hazards, operating a business can be unpredictable. Some risks - like wild weather or accidental property damage - may be out of your control, while others could still happen despite your best efforts.

The financial fallout of uninsured expenses can be devastating, particularly for SMEs with low or no cash reserves.

In the same Prospa survey, 31 per cent of respondents reported using personal funds to pay business expenses, and 46 per cent reduced their own income to get by. Without an insurance safety net, SMEs may face the excruciating choice between draining their personal savings to save their business or shutting their doors for good.

Fitting business insurance into your budget

While business insurance may be essential to protecting SMEs, the cost could still be tough to bear for those looking to trim their budgets. However, an insurance review could help you find savings while remaining covered.

BizCover recommends that SMEs periodically review their business insurance policies to ensure they are adequately covered for relevant risks. During a review, it’s important to check that you are covered for all business activities, particularly if your service offering has changed since purchasing your policies.

You may also want to consider other changes in circumstances that might affect your premiums, such as an increase or reduction in revenue, an office relocation or changes to staff numbers. In some cases, your premiums could decrease as your risk profile shifts.

It’s also important to weigh the cost of a policy against the cover provided. Not all business insurance policies are equal; some may protect you better than others. The premium paid should not be the only consideration when choosing a policy, as you could end up underinsured in key areas.

Finally, comparing business insurance quotes could also help you save.

Every insurer is different, with varying appetites for risk. One insurer may rate a small business as more of a “gamble” to insure, while another insurer may have fewer reservations. Comparable cover may be available at a lower price through a different insurer, depending on your industry, business activities and other factors.

BizCover makes it easy for on-the-go small businesses to get covered online, in minutes. Compare quotes from a great range of trusted leading insurers and see how much you could save today.

Visit bizcover.com.au or call 1300 805 821 today.

This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.

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