When a leaky hot water tank flooded a hair salon, causing an estimated $20,650 worth of damage, the owner was no doubt relieved they had business insurance.
However, the loss adjuster who came to inspect the property found that although the salon was covered for $20,000, this was only half of the true value of its contents.
This triggered the policy’s underinsurance clause, and after recalculating the payment, the salon owner was only eligible to receive $4,355.
There’s obviously a lot to keep on top of as a business owner, so it can be easy to go into insurance with a “set and forget” attitude, says Jane Mason, Head of Intermediated Business for BizCover.
This is a big no-no, she adds. In fact, regularly reviewing and updating your policy can be critical to your business’s survival.
Neglecting to do so could lead to underinsurance, of which there are three common forms. One is where your business contents are insured for less than 80% of their true value, as in the story above.
Another is when you have the wrong type of insurance—such as in the case of the food-van operator whose grill caught fire, damaging both the van and its contents. Unfortunately, they only had Public and Products Liability insurance, which doesn’t cover this sort of event.
Then there are policy exclusions. For example, the landscape architect who, due to a miscommunication, accidentally started work on a design project before getting the necessary council approval. When changes were required to the completed project, the landscape architect tried to claim these costs against their Professional Indemnity insurance. But their policy excluded payouts for “Noncompliant or Non-conforming Building Products”—in other words, work that isn’t up to code.
When insurable events occur and businesses don’t have adequate cover, “many, sadly, don’t recover,” Mason says. And yet, alarmingly, less than half (43%) of SMEs believe they are fully covered from insurable risks.
To make sure you are fully covered in the event of a claim, you may need to review and update your business insurance regularly.
Here are three signs your policy may be due for review:
1. You haven’t updated your insurance in a long time. “Businesses rarely stay stagnant,” says Mason. “So, if a company hasn’t updated their insurance in a long time, that would be a big red flag.”
2. Your company has undergone significant changes. Has your business grown? Or started offering new services? Have you invested in new equipment? Has your turnover increased greatly, or have your employee numbers changed? If you answered yes to any of these questions, it might be time for a policy update.
3. Broader economic changes. “Right now, due to inflation, a lot of insurers are doing what we call indexation,” Mason says. “What that means is they’re requiring people to adjust the sums insured on their business insurance policies to keep up to date with inflation.”
If reviewing your policy seems like too much hassle, remember that “insurers can only manage risk if they understand what the risk is,” Mason says. “And, ultimately, lack or failure to tell the insurer something important can affect whether a claim is adjusted in any way, or covered at all.”
Mason suggests writing out a list of the things that would really affect your business if they went wrong, then making sure you’re covered for those events.
For example:
“Make sure the cost you’ve declared reflects the true replacement of stock, equipment or buildings,” Mason says, “and make sure you read your policy, and always check your exclusions.
“Also, if there have been any changes to your policy upon renewal, make sure you understand what those changes are.”
Last but definitely not least: make sure you aren’t paying more than you need to for your policy.
“For small businesses, it can be quite difficult to get quotes from multiple insurers to make sure you have the best price,” Mason says. “But making access to insurance for small businesses quick and simple is something BizCover does really well. So, we make sure it’s easy to compare quotes from the insurers including, the cover and the price.”
BizCover is Australia’s no. 1 online business insurance service that simplifies comparing and buying cover, so small businesses can save time, save money and enjoy a fast hassle-free experience, and the right cover.
Comments