Questions to Ask Before Buying Business Insurance: A 20-Point Checklist

·18 min read

Questions to Ask Before Buying Business Insurance: A 20-Point Checklist

In 2026, the Australian Prudential Regulation Authority (APRA) reported that total general insurance premiums for small to medium enterprises (SMEs) exceeded $18 billion, with business interruption and public liability accounting for nearly 40 percent of claims by value. Yet the Australian Financial Complaints Authority (AFCA) noted that over 30 percent of insurance disputes lodged by small businesses in the past two years involved claims being declined due to inadequate cover or policy misinterpretation. This gap between expectation and reality often stems from a single source: the questions not asked before purchase. Buying business insurance is not a transactional exercise—it is a risk management decision that requires scrutiny of policy wording, exclusions, limits, and the legal framework governing your contract. The following 20-point checklist is designed to help you evaluate coverage systematically, using data and regulatory context to inform your choices. Each question is drawn from industry claims data, state-specific regulations, and common dispute patterns observed by AFCA.

1. What Risks Does My Business Actually Face, and Which Ones Must I Insure by Law?

Before evaluating any policy, you must establish a risk profile. This is not a theoretical exercise—it is a data-driven assessment of your industry’s claims history and your specific operations. For example, in 2025, the Insurance Council of Australia reported that construction businesses accounted for 28 percent of public liability claims, while retail and hospitality businesses faced higher frequencies of property damage and theft claims. Your first step is to identify which risks are statistically most likely for your sector, then match them to mandatory insurance requirements.

In Australia, compulsory insurance varies by state and territory. Workers’ compensation insurance is mandatory in all jurisdictions for businesses with employees, though premium rates and regulator names differ—for instance, in New South Wales, it is governed by iCare, while in Victoria, WorkSafe Victoria sets the rates. Public liability insurance is not federally mandated, but many local councils require it for contractors or events, and some states have specific requirements: in Queensland, certain trades must hold public liability cover to obtain a licence. Additionally, if you operate vehicles, compulsory third party (CTP) insurance is required in every state, though schemes vary—Western Australia’s CTP is regulated by the Insurance Commission, while New South Wales uses the State Insurance Regulatory Authority.

2. Does the Policy Cover the Full Scope of My Business Activities?

Policy wording often defines ‘business activities’ in a narrow manner. A common dispute pattern involves a business owner whose policy covered ‘retail sales’ but excluded ‘food preparation’—even if they operated a café that sold packaged goods. In 2024, AFCA reported that 18 percent of business insurance disputes involved coverage scope disagreements, often because the policy description did not match the actual operations.

You should request a copy of the policy schedule and check that the ‘business description’ field accurately reflects what you do. If you have multiple revenue streams—for example, a tradie who also does consulting—ensure each activity is listed. Ask the insurer or broker: “Does this policy cover all activities listed in my ABN registration and any sub-contracting work I perform?” In some cases, you may need separate endorsements for higher-risk activities like demolition work or handling hazardous materials.

3. What Are the Policy Exclusions, and Do They Expose My Business to Common Claims?

Exclusions are the most frequently overlooked part of a policy. Standard business insurance policies in Australia typically exclude:

Data from the Insurance Council of Australia indicates that flood-related exclusions were a factor in 22 percent of business interruption disputes in 2025, particularly for businesses in Queensland and northern New South Wales. If your business is in a cyclone-prone area, check whether the policy includes storm surge or only wind damage. For trades, faulty workmanship exclusions are critical—if you install a product incorrectly and it causes property damage, the policy may cover the resulting damage but not the cost of redoing the work itself.

4. What Are the Policy Limits, and Are They Adequate for My Assets and Revenue?

Policy limits—the maximum an insurer will pay—must be aligned with your asset values and potential liability exposures. For property insurance, you should calculate the replacement cost of your building, contents, and stock, not the market value. In 2026, the average SME property claim in Australia was approximately $85,000, but claims for total loss often exceed $500,000. Underinsurance is common: a 2025 survey by the Insurance Council of Australia found that 40 percent of SMEs had property coverage that was at least 20 percent below replacement cost.

For public liability, standard limits range from $10 million to $20 million, but certain industries—construction, healthcare, or events—may require $20 million or more based on contract requirements. Professional indemnity limits should reflect your revenue and the size of projects you handle; a common benchmark is 10 times your annual fee income. Ask: “What is the aggregate limit for the policy year, and does it apply per claim or across all claims?” Some policies have a ‘per claim’ limit with a separate aggregate, meaning multiple claims could exhaust coverage quickly.

5. How Are Premiums Calculated, and What Factors Affect My Rate?

Understanding premium calculation helps you identify what you can control. Insurers in Australia use a combination of:

For example, a retail business in a high-theft postcode in Sydney may pay 15-25 percent more than a similar business in a low-risk area. In 2026, average SME annual premiums for a combined business pack (property, liability, and business interruption) ranged from $1,200 to $4,500 for low-risk industries like consulting, and $3,500 to $10,000 for higher-risk trades like electrical contracting. Ask your insurer or broker for a premium breakdown by coverage component—this transparency helps you see where costs are concentrated.

6. What Is the Claims Process, and How Long Does It Typically Take?

The efficiency of claims handling varies significantly between insurers. AFCA data from 2025 shows that the average time to finalise a business insurance claim was 142 days, but for complex business interruption claims, it extended to over 200 days. Delays often occur due to incomplete documentation, disputes over coverage, or the need for independent assessments.

Before purchasing, request a claims process summary. Ask:

You should also check whether the insurer has a ‘claims advocacy’ service—some policies include access to a claims specialist who helps you gather evidence and liaise with adjusters. This can reduce delays significantly.

7. Does the Policy Include Business Interruption Cover, and How Is Indemnity Calculated?

Business interruption (BI) insurance is often misunderstood. It does not cover all lost revenue—it typically covers the loss of gross profit or revenue during the period your business cannot operate due to an insured event, minus any saved expenses. In Australia, BI policies commonly have a ‘waiting period’ of 48 to 72 hours before cover starts, and an ‘indemnity period’ of 12 to 36 months.

Ask: “How is the indemnity period calculated? Is it based on the time to repair or replace property, or does it include the time to restore trading levels?” For example, a restaurant that suffers fire damage may need 6 months to rebuild but 12 months to regain customer traffic. A good policy should cover the longer period. Also, check if the policy includes ‘loss of attraction’ cover—some retailers lose customers even after reopening if nearby businesses remain closed.

8. Are There Any Sub-Limits or Aggregates That Could Leave Me Underinsured?

Sub-limits are caps on specific types of loss within a broader policy. Common sub-limits in Australian business insurance include:

In 2024, AFCA noted that 12 percent of property claims were partially declined due to sub-limits being exceeded. Review the policy schedule for these caps and ask: “Can I increase sub-limits for specific items, and at what additional premium?” If you carry high-value tools, stock, or cash, you may need to schedule them separately.

9. What Is the Excess Structure, and How Does It Affect Claim Payouts?

Excess (or deductible) is the amount you pay before insurance kicks in. Most policies have a standard excess of $250 to $1,000, but you can often choose a higher excess to lower premiums. However, some policies have separate excesses for different perils—for example, a $500 excess for theft but a $2,500 excess for flood or storm damage.

Ask: “Is there a single excess per claim, or does each peril have its own excess? Are there any mandatory excesses for specific risks like burglary or fire?” Also, check if the excess applies per claim or per event—if a storm damages multiple parts of your property, you may have to pay multiple excesses. In some cases, insurers offer ‘excess waiver’ options for certain perils at an additional cost.

10. Does the Policy Cover My Legal Defence Costs, and Are They Inside or Outside the Limit of Liability?

Legal defence costs can be substantial, especially in public liability or professional indemnity claims. In Australia, the average cost of defending a public liability claim (even if unsuccessful) is between $15,000 and $50,000, according to industry data from 2025. Some policies include defence costs within the limit of liability, meaning they reduce the amount available to pay a settlement or judgment. Others provide defence costs ‘in addition’ to the limit, which is preferable.

Ask: “Are defence costs covered in addition to the policy limit, or do they erode the limit?” For professional indemnity policies, this distinction is critical—if defence costs are inside the limit, a $1 million policy could be exhausted by legal fees alone, leaving nothing for damages.

11. What Are the Policy Conditions Regarding Security and Risk Management?

Insurers often impose conditions that you must maintain to keep coverage valid. Common conditions include:

If you fail to meet these conditions and a claim arises, the insurer may decline cover based on a breach of policy conditions. In 2025, AFCA reported that 8 percent of declined claims involved failure to maintain security measures. Ask: “What are the specific risk management conditions I must comply with? How does the insurer verify compliance, and what happens if I inadvertently breach a condition?”

12. Does the Policy Cover Subcontractors, Employees, or Volunteers?

Your liability exposure extends to people working for you. In Australia, under common law, you may be vicariously liable for the actions of employees, subcontractors, and volunteers. However, not all policies automatically cover these groups. For example, some public liability policies exclude cover for subcontractors unless they are named as additional insureds.

Ask: “Are subcontractors covered under my public liability policy? Do I need to list them individually, or is there a blanket cover? Are volunteers covered for personal injury or property damage they cause?” For workers’ compensation, ensure that all employees are declared—underreporting payroll can lead to premium adjustments or claim denials.

13. How Does the Policy Handle Multiple Locations or Special Events?

If you operate from multiple sites—a retail store, a warehouse, and a home office—check whether the policy covers all locations. Some policies have a ‘principal place of business’ clause that only covers the address listed on the schedule. For home-based businesses, standard home insurance often excludes business-related claims, so you may need a separate business policy or endorsement.

Additionally, if you hold events outside your premises (e.g., product launches, trade shows), check if the policy includes ‘off-premises’ cover. Many policies limit this to a specific number of days per year or require prior notification. Ask: “Are all my business locations covered? What about temporary locations for events or client sites?”

14. Are There Any Time Limits or Notification Requirements for Claims?

Insurance policies in Australia are governed by the Insurance Contracts Act 1984 (Cth), which imposes a duty of utmost good faith and requires you to notify the insurer of a claim ‘as soon as reasonably possible.’ However, some policies specify a strict time limit—for instance, 30 days for property damage or 14 days for theft. Failure to meet these deadlines can result in claim denial.

Ask: “What is the notification period for different types of claims? Is there a penalty for late notification?” In 2024, AFCA upheld several complaints where insurers denied claims because notification was delayed by more than 30 days, even when the delay was due to the business owner not realising the damage had occurred. Set up an internal process to report any potential claim immediately.

15. Does the Policy Include Loss of Licence or Regulatory Defence Cover?

For licensed professionals—electricians, plumbers, real estate agents, accountants—losing your licence can be catastrophic. Some professional indemnity policies include ‘loss of licence’ cover, which provides a lump sum if you are unable to work due to a regulatory action. Similarly, ‘regulatory defence’ cover pays legal costs for responding to a regulator investigation (e.g., ASIC, AHPRA, or a state licensing board).

Ask: “Does my professional indemnity policy include regulatory defence costs? Is there a separate limit for these costs, and are they covered even if no civil claim is made?” In 2025, ASIC reported that regulatory investigations against financial advisers and accountants increased by 15 percent, making this cover increasingly relevant.

16. How Does the Policy Treat Cyber Risks, and Do I Need Separate Cyber Insurance?

Standard business insurance policies in Australia typically exclude cyber-related losses, including data breaches, ransomware, and business interruption caused by a cyber attack. The Australian Cyber Security Centre reported that in 2025-26, the average cost of a cyber incident for an SME was $46,000, with 60 percent of businesses experiencing at least one attack. Despite this, only 35 percent of SMEs had standalone cyber insurance.

Ask: “Does my policy include any cyber cover, such as data breach response costs or cyber extortion? If not, what cyber insurance options do you offer, and what is the typical premium range for my industry?” For 2026, standalone cyber insurance premiums for SMEs ranged from $800 to $3,500 annually, depending on revenue and security measures.

17. What Is the Insurer’s Financial Strength and Claims-Paying Ability?

An insurance policy is only as good as the insurer’s ability to pay claims. In Australia, all general insurers must hold an Australian Financial Services Licence (AFSL) and meet capital adequacy requirements set by APRA. However, financial strength ratings from agencies like S&P, Moody’s, or A.M. Best provide an independent assessment.

Ask: “What is the insurer’s current financial strength rating? Has the insurer had any recent regulatory actions or significant claim payment delays?” You can check APRA’s public register for any enforcement actions. For peace of mind, choose an insurer with a rating of at least A- (excellent) and a strong track record in your industry.

18. Are There Any Policy Renewal Terms or Non-Renewal Risks?

Insurance policies are typically annual contracts, and renewal is not guaranteed. Insurers may decline to renew based on claims history, changes in risk profile, or market conditions. In 2025, the Insurance Council of Australia noted that 12 percent of SME policies were not renewed due to adverse claims experience or risk reassessment.

Ask: “What are the renewal terms? Does the policy have a ‘non-renewal’ clause that allows the insurer to decline renewal without cause? Is there a guarantee of renewal for a certain period (e.g., 3 years) if no claims occur?” Some insurers offer multi-year policies with fixed premiums, which can provide stability.

19. How Does the Policy Interact with Other Insurance I Hold?

If you have multiple policies—e.g., a business pack, a separate cyber policy, and a directors and officers (D&O) policy—you need to understand how they interact. In Australia, the Insurance Contracts Act allows for ‘pro rata’ contribution if multiple policies cover the same loss, meaning each insurer pays a proportionate share. However, some policies have ‘excess’ clauses that require the primary policy to pay first.

Ask: “Does this policy have a ‘primary and non-contributory’ clause? How does it coordinate with my other policies, such as cyber or professional indemnity?” A broker can help you map out coverage overlaps and gaps. For example, a D&O policy may cover defence costs for regulatory investigations, but your professional indemnity policy may have a ‘regulatory defence’ sub-limit—ensuring they don’t conflict is critical.

20. What Is the Dispute Resolution Process, and What Are My Rights Under AFCA?

If a claim is denied or you are dissatisfied with the insurer’s handling, you have rights under the Insurance Contracts Act 1984 (Cth) and the Corporations Act 2001 (Cth). All licensed insurers must have an internal dispute resolution (IDR) process, and if that fails, you can escalate to the Australian Financial Complaints Authority (AFCA), which is a free external dispute resolution scheme.

Ask: “What is the insurer’s IDR process, and what are the timeframes for response? Have you had any complaints lodged against you with AFCA in the past two years, and what was the outcome?” In 2024-25, AFCA received over 8,000 complaints about general insurance, with a 65 percent resolution rate in favour of the consumer or partial compensation. Understanding this process gives you recourse if issues arise.

FAQ Section

How much does business insurance cost in Australia in 2026? Premium ranges vary widely by industry, location, and coverage level. For a low-risk business like a consulting firm, annual premiums for a combined policy typically range from $1,200 to $3,500. For a medium-risk trade like plumbing, expect $3,000 to $8,000. For high-risk operations like construction or hospitality, premiums can range from $5,000 to $15,000 or more. Always obtain multiple quotes to compare.

Is public liability insurance mandatory for all businesses in Australia? No, it is not federally mandated, but many states require it for specific licences or contracts. For example, in Queensland, building contractors must hold public liability insurance to obtain a licence. Additionally, most landlords and event organisers require proof of public liability cover. Even if not legally required, it is strongly recommended given the average claim cost of $85,000.

What is the difference between ‘indemnity’ and ‘replacement’ cover? Indemnity cover pays the depreciated value of an item at the time of loss, while replacement cover pays the cost of a new item of similar kind and quality. For business property, replacement cover is generally preferable because it avoids underinsurance. However, it costs 10-20 percent more in premium. Check your policy wording to see which basis applies.

Can I buy business insurance online without a broker? Yes, many insurers and comparison platforms allow direct online purchase. Platforms like BizCover offer a way to compare multiple policies from different insurers online, though you should still review policy wordings carefully. A broker can provide tailored advice, especially for complex risks, but online comparison tools are useful for straightforward policies.

What happens if I do not declare all my employees for workers’ compensation? Underdeclaration can lead to significant consequences. Insurers may adjust your premium retrospectively, charge penalties, or decline a claim if an undeclared employee is injured. In some states, like Victoria, WorkSafe can impose fines for underreporting payroll. Always declare your actual payroll and any changes during the policy period.

Can I change my insurance policy mid-term if my business activities change? Yes, you can request a mid-term adjustment, but it may result in a premium adjustment or a new policy. For example, if you add a new service line or hire more employees, you should notify your insurer immediately. Failure to do so could void coverage for claims related to the new activity. Most insurers allow changes with pro-rata premium adjustments.

How do I know if my policy covers flood damage? Flood cover is not automatically included in standard business policies. You must check the policy wording for a ‘flood’ definition, which may differ by insurer. Some policies cover flood as a named peril, while others exclude it entirely. In high-risk flood zones, you may need a separate flood policy or endorsement. Ask your insurer for a clear statement on flood cover.

What is the typical excess for business insurance? Standard excesses range from $250 to $1,000 for most claims, but you can choose a higher excess (e.g., $2,500 or $5,000) to lower your premium. Be aware that some perils, like flood or storm, may have a separate, higher excess—often $2,500 to $5,000. Always confirm the excess structure before purchasing.

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