5 Questions Every Small Business Owner Asks Their Insurance Broker (And What the Answers Actually Are)

Key Takeaways:

• Most small business owners don’t know the difference between PI, PL, and a business pack. You’re not alone.
• Excess levels can vary by thousands of dollars across insurers for the exact same cover. Always compare.
• Getting declined doesn’t mean you’re uninsurable. It usually means you need a broker, not a comparison site.

You started a business to do what you’re good at. Not to become an insurance expert.

But at some point, you need cover. And that’s when the questions start. What do I actually need? Why is this excess so high? Why did I just get knocked back?

We hear these questions constantly. In fact, across our client base, “what cover do I need” comes up more than any other topic. So here are the five questions small business owners ask us most, and the straight answers.

What business insurance do I actually need?

It depends on your industry, how you operate, and who you work for. But most small businesses need at least public liability, and many need professional indemnity as well.

Here’s the short version. Public liability covers you if someone gets injured or their property gets damaged because of your business activities. Think: a customer trips in your shop, or you damage a client’s property on a job site. Professional indemnity (PI) covers you if your professional advice, designs, or services cause a client financial loss. Think: an engineer’s design has an error, or a consultant gives advice that costs someone money.

A business pack bundles public liability with other covers like tools and equipment, business interruption, and more. It’s usually the most cost-effective option for trades and small businesses. Where professional indemnity is needed, we’d usually arrange that as a separate standalone policy.

The confusion is understandable. We see it every week. A plumber calls asking for “just public liability” but actually needs a business pack that includes their tools and ute. A freelance graphic designer thinks they only need PL when what they really need is PI, because they’re providing professional services.

Real scenario: A not-for-profit netball club came to us needing public liability just to hire courts. Sounds simple, right? It wasn’t. Multiple insurers declined because “sporting association” fell outside their appetite. The club had no idea there’d be an issue. We eventually placed cover through a specialist underwriter, but it took legwork that a comparison site simply wouldn’t do.

If you’re unsure, consider talking to a broker. Not because we’re trying to sell you something, but because getting the wrong cover (or missing a key policy) can be worse than having no cover at all.

Why is my excess so different across quotes?

Because insurers have completely different appetites, risk models, and pricing structures. The excess on your policy isn’t a fixed number. It varies wildly.

Excess is the amount you pay out of pocket when you make a claim. A lower excess usually means a higher premium, and vice versa. But what catches people off guard is just how different the excess can be across insurers for what looks like the same policy.

We quoted a real estate agent’s PI policy recently and received five quotes for $2 million in cover. The excess ranged from $2,000 all the way to $5,000. Same occupation, same limit, same client. The cheapest premium (~$1,000) actually came with a $2,000 excess, while some of the more expensive options had a $5,000 excess. There was no simple trade-off between premium and excess.

Insurer	Premium	Excess
Insurer A	~$1,000	$2,000
Insurer B	~$1,485	$2,500
Insurer C	~$1,595	$5,000
Insurer D	~$2,337	$2,500
Insurer E	~$2,502	$5,000

That’s a real spread. And it shows why looking at premium alone doesn’t tell you much. The cheapest option might leave you with a much bigger bill if you need to claim.

Can you change your excess? Sometimes. Some insurers let you choose between excess levels (eg a $1,000 vs $2,500 option), and the premium adjusts accordingly. But it’s not always flexible, and some policies have mandatory excess levels for certain claim types.

The key thing: it’s worth comparing the full picture. Premium plus excess plus what’s actually covered.

Why was my insurance declined?

Being declined (or told you’re “not in appetite”) doesn’t mean your business is risky or dodgy. It usually means that particular insurer doesn’t want to cover your specific type of work.

This one frustrates people more than anything. You fill out a form, maybe even pay for a quote, and get a flat “no” with very little explanation.

From what we see in our book, the most common reasons businesses get declined are:

1. Niche occupation - Your specific trade or profession sits outside the insurer’s preferred categories. We’ve had cases where a business was knocked back by half a dozen or more insurers because their specific niche fell outside standard appetite. It’s not unusual, and it’s exactly when having a broker who knows which specialists will consider your risk makes all the difference.
2. Claims or accident history - Past claims, even small ones, can push you out of an insurer’s guidelines. We’ve seen motor vehicle quotes declined purely due to accident history.
3. Modified vehicles or equipment - One client’s Hilux was declined because the total value of accessories exceeded 30% of the vehicle value. That was the insurer’s hard rule.
4. High-risk activities - Sporting clubs, adventure tourism, working at heights. The “high personal injury exposure” flag gets raised quickly.

The important thing to know: getting declined by one (or even several) insurers doesn’t mean you can’t get cover. It often helps to work with a broker who knows which underwriters handle your type of risk. That’s what we do.

As our team puts it: “The difference between getting declined and getting cover often comes down to knowing the right underwriter for your risk. That’s the insider knowledge a comparison site just doesn’t have.”

Is my sum insured right?

Probably not. And that’s a bigger problem than most people realise.

Your sum insured is the maximum amount your insurer will pay out if something goes wrong. For property, it’s the cost to rebuild or replace. For contents, it’s the replacement value of everything inside. Get it wrong and you’re underinsured, which means you’ll be out of pocket when it matters most.

This is especially common with landlords and property investors. Building costs have gone up significantly in the last few years. When we speak with new clients, it’s not uncommon for them to be underinsured by 20% or more because they haven’t reviewed their sum insured in years. That’s why we always have the conversation around updating the sum insured annually.

Here’s where it gets technical. Many commercial property policies include an “average clause” (sometimes called co-insurance). This is a formula insurers use to reduce your payout if you’re underinsured. The basic calculation works like this: (sum insured ÷ actual replacement value) × claim amount = what you receive.

So if you’re insured for $500,000 but the actual rebuild cost is $750,000, and you make a $300,000 claim, the insurer calculates: ($500,000 ÷ $750,000) × $300,000 = $200,000. You’d receive $200,000 instead of the full $300,000.

That’s a $100,000 gap. And it’s entirely avoidable. It’s worth noting that different insurers apply this slightly differently, so always read the Product Disclosure Statement (PDS) carefully to understand how your specific policy handles underinsurance.

What we recommend: Review your sum insured annually. Use a quantity surveyor or at minimum an online rebuild cost calculator to get an updated figure. Don’t just increase last year’s number by CPI, because construction costs don’t always follow the consumer price index.

For businesses, the same principle applies to your tools, stock, equipment, and fit-out. If you’ve bought new gear, expanded your workshop, or renovated your premises, your cover needs to keep up.

Am I covered for flood? What about cladding?

These two come up constantly, and the answers aren’t always what people want to hear.

Flood is one of the most misunderstood parts of property insurance. In short: flood cover is increasingly common in modern policies, but inclusion and terms vary widely depending on your location and risk profile. If your property is in a high-risk flood zone, the premium impact can be significant, or cover might be restricted or excluded entirely.

After the major flood events of 2022 in Queensland, Northern NSW, and parts of Victoria, insurers tightened their flood underwriting significantly. Properties in mapped flood zones (you can check this on your local council’s planning portal) may face higher premiums, higher excesses specifically for flood claims, or sub-limits on flood payouts.

We deal with this regularly across both our landlord and commercial property portfolios, particularly for properties in regional areas. The best approach is to be upfront about flood risk and work with a broker who can access insurers that continue to offer flood cover in your area, though options and premiums vary significantly by location.

Cladding is the other big one, especially for strata and apartment investors. If your building has combustible cladding (the type flagged after the Lacrosse and Grenfell Tower incidents), some insurers will decline outright, while others will cover you but with cladding-related exclusions or significantly higher premiums.

Across our portfolio, cladding questions come up regularly, particularly for landlords and strata scheme owners. It’s one of the top underwriting concerns we flag at renewal time. The key question isn’t just “am I covered?” but “what’s excluded?” A policy that covers everything except cladding-related fire damage isn’t much help if that’s the actual risk.

Tip: If you own a unit or investment apartment, check with your strata manager whether the building has had a cladding audit. In NSW, the government maintains a register of buildings with identified combustible cladding. Knowing where your building sits on that register can save you a lot of headaches at renewal time.

Frequently Asked Questions

Do I need insurance if I’m a sole trader?

Yes, in most cases. Being a sole trader doesn’t exempt you from liability if someone gets injured or suffers financial loss because of your work. Public liability is strongly recommended for any sole trader who interacts with clients, visits job sites, or has people entering their business premises.

What’s the difference between a broker and a comparison site?

A comparison site shows you a handful of pre-selected options. A broker accesses a full panel of insurers (including specialist underwriters that don’t appear on comparison sites), understands your specific situation, and advocates for you if you need to claim. The difference matters most when your risk is non-standard.

How often should I review my business insurance?

At least annually, and whenever your business changes significantly. That includes hiring staff, buying new equipment, expanding into new services, or starting work in a new state. Your policy needs to reflect what your business looks like now, not what it looked like when you first took out cover.

Can I reduce my premium without losing cover?

Sometimes. Increasing your excess is one option. Bundling policies into a business pack often saves money compared to buying individual policies. Improving your risk profile (eg installing security systems, maintaining a claims-free record) can also help. But be careful about stripping out cover just to save money, because that’s a false economy if you end up claiming.

Getting the Right Cover for Your Business

The common thread across all five questions? Insurance isn’t one-size-fits-all. What you need, what you’ll pay, and what you’re actually covered for depends on your specific business, industry, and circumstances.

The best thing you can do is ask questions. And if your current insurer or provider can’t give you clear, plain-English answers, that’s a sign you might benefit from talking to a broker.

Need help sorting out your business insurance? Tank Insurance specialises in business and property insurance across Australia. Reach out to our team at 02 9000 1155 or [email protected] to talk through your situation.

This is general information only. It does not take your objectives, financial situation, or needs into account. Always read the relevant Product Disclosure Statement (PDS) and seek independent advice before making insurance decisions.