So you're going out on your own?
- David Pine, NZIJ Risk Management
If you have recently decided to become self employed, welcome to the club ! You are part of a world wide trend. Self employment brings immense satisfaction but there are potential risks that you haven’t had to face as an employee. Insurance can protect you against some of those risks.
When you are just starting out, it is important to keep your overheads low to prevent undue strain on your cash flow. For this reason we recommend that new businesses should be careful about the amount of insurance they take on initially. It may be prudent not to insure for everything until your cash flow builds up.
Perhaps the most important cover for a new business is in the liability area. It may be that during the course of your business you may damage someone else’s property or cause someone to be injured. Public Liability (sometimes called Broadform Liability) is designed to help protect you in these instances. It is not expensive. The yearly cost is likely to be between $450 and $750, for $1 million of cover.
If a large part of your business has to do with the giving of advice, then you could be at risk if you should inadvertently give wrongful advice or forget to give advice The appropriate cover is Professional Indemnity, which is a lot more expensive: perhaps $1500 to $2500 for a year. Most professions offer a liability insurance scheme that many people in that occupation belong to. This can reduce the cost considerably. In our own case, when we had professional indemnity on our own, we paid about $2000 per year. Now as part of a group scheme we pay just $700 for the same cover.
For your business assets, if these are not particularly valuable, you may decide not to insure them initially because you would be caught by the minimum premium that all insurers charge. If you are operating your business from home, contact your domestic insurer and they will almost certainly add your business assets to your contents insurance. This is a lot cheaper.
If you are using your car in the business, you must tell your car insurer, otherwise they will not pay a claim if an accident happens while you are using your car for business. If you do not have car insurance, we strongly recommend that at the very least you have third party cover. If you should hit an expensive car and it is your fault, the insurer for the other car will fix it. But then they will come to you for compensation. As a new business owner you simply cannot afford to expose your fledgling business to that kind of risk. Third party cover will probably cost you less than $150 per year.
As your business grows and develops you will be able to afford more comprehensive insurance protection.
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