Business Package is suite of coverages designed to cover various risk that small business is exposed to. The insurance market developed the product so the policyholder could have a single policy covering common exposures they are contractually obliged to hold such as public liability, material damage, theft and business interruption.
If a business has significant assets, they will be directed to purchase industrial special risk cover (see our fundamental here). Similarly, where they have significant exposure for public and products’ liability, a standalone general liability policy will be more suitable (see our fundamental here). Respectively the thresholds are less than $10m assets and $20m in turnover.
A business pack is the commonly used to satisfy landlord, banks and building manager’s requirements to insure. They are relatively easy to transact requiring limited particulars and there are significant online systems that enable quick quotations. There are some pitfalls, limitations in cover and nuances around declarations and businesses should take care to obtain advice to ensure such a policy is appropriate and adequate for their needs.
What is covered by a standard business package policy
These policies have several coverage sections:
Property: Covers material damage to buildings, contents and stock as a result of accidental damage (if taken), fire, storm, impact, malicious damage, wind and other perils. Can be extended to provide flood cover depending on where the asset is located and insurer appetite.
Business interruption: Covers loss of gross profit, additional costs incurred to continue trading, accounts receivable and claims preparation expenses as a consequence of material damage or prevention of access to the assets covered by the policy.
Theft: Covers theft of insured property or damage to your business premises due to theft or an attempted forcible entry. Cover may also be extended to cover theft of items in the open air.
Money: The Money section provides cover for loss of business money at your premises and, or in transit.
Machinery Breakdown: Covers the repair or replacement of machinery that is not damaged from an insured peril, however, suffers damage as a result of a breakdown or electrical surge. Items typically insured include air conditioning, cooking equipment, processing units and refrigeration units. The section can also be extended to cover business interruption and spoilage of goods.
General Property: Covers the cost to repair or replace specified items of property that are accidentally lost or damaged. The coverage extends to indemnify for loss or damage to the specified items across Australia or worldwide as opposed to only at the insured location.
Glass: Covers damage to internal and external glass and signage at the insured business location. This section is usually taken for compliance to insure plate glass which is often stipulated under a lease agreement.
Public & Products Liability: Covers the insured’s legal liability to pay compensation for claims arising from business activities causing bodily injury or property damage to a third party. Indemnity extends for legal costs defending a matter, and in the event the policyholder is unsuccessful, adverse costs.
What it doesn’t cover
Common Business Package exclusions are:
- Material damage where the inured asset is unoccupied for over 90 days
- Loss arising from the insured asset being renovated construction works
- Under-insurance?
- Sub-contractors?
- Work outside the defined business
- Contractually assumed obligations
- Terrorism
There will also be a deductible or excess and limits on cover, contact your Bellrock Advisor for additional information.
Who should consider it?
Businesses with assets under $10m. It would be more cost effective to purchase a single package policy to provide them
Contractors and tradespeople such as construction contractors, plumbers, and electricians need insurance coverage for their tools, equipment, liability exposures and potential property damage or injuries on job sites.
Who shouldn’t consider it?
- Businesses with complex risk exposures. These risks require bespoke solutions that are usually broader than the coverage afforded under a business package.
- Insureds with business interruption risks that are present at multiple locations, or require cover for losses at their customers and suppliers’ locations
- Businesses with assets exceeding $10m
Claims example
The insured owns a restaurant and one evening, while the restaurant is closed, a fire breaks out in the kitchen due to an electrical malfunction in one of the fridges. The fire quickly spreads and causes significant damage to the kitchen area, destroying equipment, supplies, stock, and part of the interior structure.
The insurer agrees to pay for damage to the kitchen items that were effected. The insurer also covers the cost of the lost income and ongoing expenses that occurred as a result of the business being closed for an extended period.
In terms of business property that was affected by the incident, contents and stock that were damaged were also covered under the business property section of the policy.
Information required to obtain quotation
Generally, the following information is required at a minimum to obtain terms:
- Business Details
- Insured name
- Business address
- Industry type
- Number of Employees
- Annual revenue (gross profit?)
- Wages?
- Property information
- Description of property including buildings, equipment, inventory and other assets
- Property location and construction details
- Property value and replacement cost estimates
- Security features and fire preventative systems in place
- Desired coverage types and limits such as property insurance, liability insurance, and business interruption
- Replacement value of the assets being insured, including real property, contents and stock
- Any requirement in your lease or contracts specifying requirements to insure for plate glass and public liability. As regards the latter any particulars of policy limit and any ‘landlord, bank, client or owner’ that requires their interests noted as an insured on the policy.
