Is your business making these insurance mistakes?

If you need to make a claim, having suitable insurance in place will help you get back on your feet. The problem is, many businesses go to make a claim only to realise they haven’t got the right policy for their needs.

In some cases a business is underinsured – meaning they don’t have a suitable level of cover – and in others their policy isn’t appropriate for their situation.

When you’re getting insured, here are some common mistakes to avoid.

1. Underinsurance

When companies are underinsured, their sum insured is inadequate. 

An example of this is having cover for a $1.5 million building, when it’s realistically worth $2.5 million. When a claim is made, the insured can only claim $1 million, so they will not be provided with the funds they need to rebuild a building of the same quality.

Similarly, if only a proportion of the building needs to be repaired, an underinsured business may receive a fraction of what they actually need. The difference could be hundreds of thousands of dollars, and leaves a significant financial burden on the company.

In other instances an underinsured business may have no cover at all, or have gaps in their cover. The latter could mean the building itself is insured, but there is no business interruption insurance.

Addressing underinsurance starts with getting your building value right, which can be particularly difficult for those with high value or complex structures. If you’re not sure how to determine an appropriate sum insured, you may opt to get assistance from a valuer or builder.

There’s also the option to speak with your broker, who can help point you in the right direction.

2. Risks aren’t appropriately assessed

As a business, you need to have a formal risk assessment process. Not only that, but it must be reviewed and updated regularly, such as quarterly, because risks are always changing.

Risks can often be categorised into four groups – operational, strategic, regulatory and reputation – but this isn’t a rigid approach and can be catered to your needs. Many businesses also benefit from engaging a surveyor, who can formally assess different types of risk on your premises.

After identifying risks, mitigation strategies that specifically target each threat need to be developed. This reduces the chance risks will become real issues.

3. Taking out the wrong type of cover

While they take out insurance, it isn’t until they go to make a claim that many businesses realise they don’t have the right cover in place and aren’t adequately insured.

Keeping employees safe while they’re working overseas could be one example of an oversight. The Australian federal government’s Smart Traveller website gives businesses information about what they should be doing. A detailed emergency response plan is a must, as is taking personal safety precautions, just to name a few examples.

Whether employees are in the office or travelling overseas for work, businesses have a duty of care to ensure they’re safe.

For more information, or if this article has brought up any queries about your cover, get in touch with your insurance adviser. We can work with you to make sure you get the appropriate level of protection.

Disclaimer

Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.

The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.