Welcome to Tony Bourke – Insurance tips, tricks and traps

This Forum invites a number of experts to be a guest for one week and control discussions on specific topics. The public can gain a great deal of free information from reading the posts, but only members may write posts, add to discussions and ask and answer questions. I hope that everyone enjoys the forums and topics that will be featured.
Barbara Gabogrecan
President

Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Barbara Gabogrecan » Fri Nov 25, 2011 12:50 pm

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We all need insurance, whether or not it is for our private use (car and home) or for business. Insurance always seems expensive, but without it, we are really taking great risks for financial hardships. How often do we hear of a home being destroyed by floods, fires or storms and because they are not insured, the owners lose everything?

Then we have the problem of knowing if we are taking out the best insurance that will look after us and any claims we may have, quickly and without fuss. Our expert, Tony Bourke not only knows a lot about insurance, he has written a book to give readers the best possible information to ensure they get what they really want in insurance.

His book (and his discussion with us) includes such things as insurance tips, tricks and traps for Home Based Business Owners.
He discusses:-
* why home insurance is not enough for a HBB;
* under Insurance and how it effects your claim;
* public Liability and what does it really cover;
* the dilemma of insurance for laptops, tablets, smartphones etc;
* the insurance dilemma facing home based subcontractors etc,
* do you need Workers Comp etc.
* under Insurance and how it effects your claim

As this is a topic I know very little about and as I have experienced some 'weird and wonderful' Insurance brokers, I look with interest at reading the posts from Tony.
Barb
Barbara Gabogrecan assists HBB's to market their business online
http://www.HomeBasedBusinessAustralia.org

Barbara is an artist specialising in silk painting; her video is on page one of You Tube http://youtu.be/1ZA9HObN_Go
http://www.SilkPaintingByGabogrecan.com/

Having survived a stroke and a brain tumour, Barbara wrote a book titled 'Thank God I Had a Stroke' to motivate and inspire others suffering from similar afflictions.
http://GabogrecanStrokeRecovery.com/
Barbara Gabogrecan
 
Posts: 341
Joined: Sun May 03, 2009 12:57 pm

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Tony Bourke » Mon Nov 28, 2011 8:42 am

Hello Barbara,

Thanks for the introduction and it is fantastic to have the opportunity to give some helpful information on insurance for a home based business.

The world of insurance can be confusing, frustrating and if you get your choices wrong...... financially crippling.

A lot of insurers seem to be pushing the cheapest price, discount and loyalty buttons to try and get your business however insurance is definitely not a product you can afford to purchase based on the cheapest price alone.

If you do that you are likely to find that the very thing you thought you has cover for may not have cover at all!

Over the week I will give you some tips to get it right, some traps to avoid and hopefully put you in a position where you can secure insurance in the knowledge that what you purchased is right for you.

Also I will be giving away a copy of my book "Risk Your Business, Risk Your Life" to the person who posts the best comment or question on my topic. So here we go!

Why Home and contents Insurance is not enough for a Home Based Business

The biggest mistake I see made by home based business owners is assuming that the home and contents policy they have will be sufficient to cover their business at home.

If you run a home based business here is the list of things to think about as far as insurance is concerned:

Property, Contents and Stock of the business - Never make the assumption that your home insurance will cover your business contents, stock and fixtures etc. Some policies may contain a small limit to cover your home office contents such as your desktop computer and printer however no home insurance policies will cover stock. You will always need a separate business policy to cover stock.

Public Liability Insurance - Your home and contents policy will not pick up cover for public liability on your business. You must have a separate public liability policy to cover your business activities.

Portable Equipment owned by the business - Never assume that your home and contents policy will cover things such as laptops, IPads etc owned by the business. Quite often there will be an exclusion for these sort of business items in your home policy. Also never assume that they are automatically covered if they are lost or damaged away from the home.... most of the time this won't be covered and you should have these items insured on a separate business policy.

Well that's just a small overview of what lies ahead this week.

If you have any questions or comments I look forward to reading them throughout the week.
Regards

Tony Bourke
Director
AIIB Pty Ltd
Insurance Brokers
Mob 0432 686907
Email tbourke@aiib.com.au

Author of "Risk Your Business, Risk your life" and co-author of the best seller "In Service". For more details visit: http://www.tonybourke.com.au
Tony Bourke
 
Posts: 9
Joined: Tue Sep 27, 2011 10:30 am

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Barbara Gabogrecan » Mon Nov 28, 2011 11:00 am

Some really mind blowing 'stuff' in your first post Tony. I find that many HBB don't necessarily separate home from business as items are often cheaper to simply have them as a home item. For example, most use their home phone as a business phone. Things like IPads and computers are also purchased as private items but are used for business as well as for private. This is probably because there is just one person using the item and they do use them for both private and business.

Can you comment on this as far as insurance is concerned?
Barb
Barbara Gabogrecan assists HBB's to market their business online
http://www.HomeBasedBusinessAustralia.org

Barbara is an artist specialising in silk painting; her video is on page one of You Tube http://youtu.be/1ZA9HObN_Go
http://www.SilkPaintingByGabogrecan.com/

Having survived a stroke and a brain tumour, Barbara wrote a book titled 'Thank God I Had a Stroke' to motivate and inspire others suffering from similar afflictions.
http://GabogrecanStrokeRecovery.com/
Barbara Gabogrecan
 
Posts: 341
Joined: Sun May 03, 2009 12:57 pm

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Tony Bourke » Mon Nov 28, 2011 11:21 am

Hi Barbara,

Thanks for your question.

You have to be a bit careful in the case of using privately purchased items in the business.

It is not uncommon to see exclusions in home & contents policies, particularly for portable items like laptops where the exclsuions will read something like:

"We will not cover claims for loss or damage to portable items used in a business" or something to that effect.

It really is a case unfortunately of having to read your policy wording (yep I know they are boring and difficult to read!).

Either that or find yourself a good insurance adviser who can make sure you have the right policies in place to protect you.

I hope this answer helps to clarify the scenario.
Regards

Tony Bourke
Director
AIIB Pty Ltd
Insurance Brokers
Mob 0432 686907
Email tbourke@aiib.com.au

Author of "Risk Your Business, Risk your life" and co-author of the best seller "In Service". For more details visit: http://www.tonybourke.com.au
Tony Bourke
 
Posts: 9
Joined: Tue Sep 27, 2011 10:30 am

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Tony Bourke » Tue Nov 29, 2011 8:16 am

So here we go with my next topic and it is one that can have a significant financial impact on you if you get it wrong:

What happens if I am under insured?

The vast majority of business insurance and home and contents policies contain an "under insurance clause" within them to encourage people to make sure they insure their property, contents and stock etc for the full new for old replacement value.

Whilst the words "under insurance clause" may sound harmless what those words really mean is "under insurance penalty" if you don't have the right amount insured and you have a large claim.

To show you what sort of financial impact this "clause" can have on you in a claim here is how it works in simple terms:

Amount you have insured for Contents on your policy is $50,000

Actual new for old replacement value of your contents is $100,000

In a storm a large amount of your contents is water damaged for $30,000

As you were under insured by 50% the insurance company only pays you $15,000

As you can see the under insurance clause will hurt you financially if you get your amount insured wrong.

Most insurance companies will give you a margin of error on your replacement value of 10-15% without applying the penalty.

They also will not apply it if you lose everything however if they are only giving you $50,000 when you need $100,000 to replace all you have you can see the financial mess being under insured can leave you with.

So what is the best way to make sure you get it right?

Well there are really only 2 ways.

The first is that most insurance companies now have calculators on their websites that can assist you to come up with a replacement value.

The second and more accurate way to go (it is time consuming though!) is to go room by room in your premises and list down everything you have and then write down what the cost replace the item with a new one is.

Keep the full list on your computer and don't forget to keep a copy on a disk off site as well so you have proof of what you had. Taking photos room by room is also recommended as you also have visual proof of what you had.

I hope that this explanation makes sense. It is so important that we all understand just how this works so we can make sure we never have to worry about it.

I look forward to your comments or questions.
Regards

Tony Bourke
Director
AIIB Pty Ltd
Insurance Brokers
Mob 0432 686907
Email tbourke@aiib.com.au

Author of "Risk Your Business, Risk your life" and co-author of the best seller "In Service". For more details visit: http://www.tonybourke.com.au
Tony Bourke
 
Posts: 9
Joined: Tue Sep 27, 2011 10:30 am

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Peter O'Connor » Tue Nov 29, 2011 9:21 pm

Hi Tony

Some great stuff here.

If I have a home business cover for my office equipment. Will it cover the software I have on my computers as well, as it is worth more than the physical computers. I know I have accidental damage cover, but I'm not sure whether this includes software.

Would like to hear your comments.

Regards

Peter
Peter O'Connor, is a retired accountant and is involved with teaching home based businesses how to build and manage their own websites.
http://www.HomeBasedBusinessAustralia.org
Peter O'Connor
 
Posts: 79
Joined: Sun May 03, 2009 10:12 am

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Tony Bourke » Wed Nov 30, 2011 7:48 am

Hi Peter,

A good question.

Whether you have cover for the software will depend on the insurance company and policy you have.

It will all come down to what the insurance company defines as "business contents" in the policy definitions.

The best way to make sure there can be no confusion is to make sure you policy is noted to cover computers and accessories including software.

As long as you make sue the value you have insured reflects the full replacement value including the software and have it described as above you should be fine.
Regards

Tony Bourke
Director
AIIB Pty Ltd
Insurance Brokers
Mob 0432 686907
Email tbourke@aiib.com.au

Author of "Risk Your Business, Risk your life" and co-author of the best seller "In Service". For more details visit: http://www.tonybourke.com.au
Tony Bourke
 
Posts: 9
Joined: Tue Sep 27, 2011 10:30 am

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Tony Bourke » Wed Nov 30, 2011 8:14 am

And now onto today's topic:

Public Liability and Products Liability. What does it cover?

The basic plain English description would be as follows:

"Covers injury or damage to other parties or their property caused through the negligence of your business or your business products."

Who Needs It? In my opinion every business needs it. You are taking a great risk by not having it.

Remember all it takes is an allegation by someone else that you have been negligent in causing injury or damage (whether you have been or not) and you may find yourself up for huge legal costs just to defend yourself.

A Public and Products Liability will also respond to defend the matter on your behalf if you have not been negligent.

Here are some tips or traps to watch for:

- Public Liability policies do not cover injury to employees. Workers Comp is required for this.

- Never admit liability to the other party if an incident occurs. By doing so you may void your insurance cover. (Note this rule also applies to motor vehicle policies!)

- If you are an importer under Australian law you are deemed to be the manufacturer of the good you import if they cause injury or damage. You must tell your insurer if you are importing goods.

- Will not always cover you for any contractors / subcontractors you use if they cause injury or damage.

- Cover may be restricted to Australia Only. If you export product you need to tell your insurer so they can give you that cover.

- Will not cover the cost of replacing faulty products or the cost of recalling products. It will not cover faulty workmanship. It only covers the resulting injury or damage caused by faulty products or workmanship.

I hope this helps you to understand this cover better and I look forward to your questions or comments.
Regards

Tony Bourke
Director
AIIB Pty Ltd
Insurance Brokers
Mob 0432 686907
Email tbourke@aiib.com.au

Author of "Risk Your Business, Risk your life" and co-author of the best seller "In Service". For more details visit: http://www.tonybourke.com.au
Tony Bourke
 
Posts: 9
Joined: Tue Sep 27, 2011 10:30 am

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Tony Bourke » Thu Dec 01, 2011 9:34 am

It's Thursday already so here is another topic that effects most HBB's:

The dilemma of insurance of Laptops, Tablets, Smartphones etc

Usually one of the first bits of equipment a business will purchase is a laptop computer, tablet and or a smartphone.

So is it worth insuring these items and if so what sort of insurance cover options are available for these items?

When I am speaking to a business owner about insuring their portable electronic equipment the first question I ask is usually this:

What would happen to your business if you your laptop, tablet or smartphone is lost or damaged? Could your business continue without the item?

Usually the answer comes back with 2 outcomes:

1. The business and all the data for the business is stored on my device and If I lost it my business would cease to function.

2. My device makes business easier but I back up my data to an external source daily so if I lost the device my business would not be financially crippled.

Depending on which of the above 2 answers fits your business will provide the answer as to what you should do with insurance.

It only makes sense to insure portable devices if they are a critical component of the business.

In most cases to insure a laptop, tablet or smartphone worth say $1,000 for loss or damage anywhere in Australia the cost of the premium will be approx $150 - $200 per year.

The excess in the event of a claim will usually be $250 so that is $450 the business has spent to get back a $1,000 item.

Given that you can depreciate the item through your business you can see that in this sort of example the item may not be worth insuring.

If on the other hand the item is an expensive device and to replace it and all the software you have on it would cost the business say $3,000 then you may need to consider insuring it.

In most cases now with the technology available it seems that the average business can run with a device that costs usually around $1,000 to replace.

In addition you can back up your data to a secure external source ("cloud data backup") on a daily basis for a very reasonable cost so this should mean that you can replace your item and retrieve the data and be back up and running within 24 - 48 hours.

This being the case you can see why I always advise business owners that when it comes to insurance always start with insuring the items that can financially cripple the business first.

Items such as office equipment, fit out, stock, business income etc are usually of higher value to replace and are usually more important to insure.

If you have money left in your budget then make the choice as to whether insuring portable devices is worth it for you.
Regards

Tony Bourke
Director
AIIB Pty Ltd
Insurance Brokers
Mob 0432 686907
Email tbourke@aiib.com.au

Author of "Risk Your Business, Risk your life" and co-author of the best seller "In Service". For more details visit: http://www.tonybourke.com.au
Tony Bourke
 
Posts: 9
Joined: Tue Sep 27, 2011 10:30 am

Re: Welcome to Tony Bourke – Insurance tips, tricks and traps

Postby Tony Bourke » Fri Dec 02, 2011 9:21 am

On to our topic for Friday:

The insurance dilemma for home based subcontractors.

With the number of people working from home steadily on the increase it is becoming more and more common for large Australian or multinational companies and government departments to appoint subcontractors to operate some functions of their businesses.

It is quite common now for a large company to offer a long time employee or service provider the chance to gain their independence and start their own business subcontracting to the company.

I am often approached by people who have been offered that opportunity asking me exactly what sort of insurance they will need in order to operate this way.

Below are the main things to consider from an insurance perspective if you are operating this way or if you have been offered the opportunity to start up this way:

- Beware the fine print in your contract/agreement - Your contract/agreement with the company you will be providing work for will generally be a large document full of a lot of legal jargon. From an insurance perspective you need to make sure that you are not signing away your rights in the contract. Quite often there will be headings in the contract entitled "insurance", "indemnity" "hold harmless" or "Liability". Be very careful. You may be agreeing to be responsible for things that could cause you a significant financial loss if you sign these contracts without legal advice. You may also void your insurance cover if you sign these sort of contacts without referring these to your insurer for their approval.

- Business Structure e.g sole trader, partnership, company etc - The business structure you choose to operate under will also determine what sort of insurance you may need. Different structures have different requirements for things such as Workers Compensation. It is always recommended that when you are looking at the business structure options and costs with your accountant, always get an insurance adviser to provide you with the difference in insurance costs for these structures. This way you will not get any nasty surprises after you have set up.

- Beware of contracts that insist on you taking out unnecessary insurance covers - Large companies tend to use a standard contract/agreement for their subcontractors. Within that document they will sometimes list down certain types of insurance that they require you to have e.g Public Liability, Professional Indemnity, Workers Compensation. Depending on the business services you are providing and your business structure some of these insurance policies may note be available to you or may not be required. As an example it is not uncommon for someone to be told they need professional indemnity insurance when really the services they provide do not have any exposure for this insurance. Given that most professional indemnity insurance prices start at around $1,000 per year and you can see how you may be paying a large amount of money for no reason.

So to sum up make sure if you are offered this opportunity that you seek independent advice from an accountant, business lawyer and insurance adviser before you sign a contract. It may save you a large amount of time, money and stress.
Regards

Tony Bourke
Director
AIIB Pty Ltd
Insurance Brokers
Mob 0432 686907
Email tbourke@aiib.com.au

Author of "Risk Your Business, Risk your life" and co-author of the best seller "In Service". For more details visit: http://www.tonybourke.com.au
Tony Bourke
 
Posts: 9
Joined: Tue Sep 27, 2011 10:30 am

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