So you started your business and covered all your bases by getting insurance. Fast forward and now your business is doing great! You might be smashing your targets, making fantastic profits, growing quickly, and hiring new employees, but did you consider that the insurance you got on day one might need a review by now?
There are countless risks that can come in and knock your business off track. By reviewing your policy and making sure it is comprehensive enough for now and the future of your growing business.
John Elliott, Managing Director of Elliott Insurance Brokers, states that you need to talk to your insurance broker when changes are happening in order for the insurance to keep up with your business growth as in the event of a claim, you might not be covered, resulting in a step backwards for your business. He notes, “so many businesses only look at their insurances once a year when they are due for renewal, not during major changes in their business. The most important time to chat to your insurance advisor is during any change to your business, not just once a year at renewal.”
There are eight common mistakes that businesses make that call for improvement:
1. Not regularily reviewing their insurance policies
By regularly reviewing your policy (not just once per year) you can make sure that you are keeping up with the sums and items you need insurance for. What you have insurance for at the start of the year can significantly change by the end of the year and in between. Keeping your insurance broker up to date as changes happen is the key, says Elliott “this allows your insurance advisor to make the appropriate changes to your insurance program to ensure you always have the correct coverage. Without it, there is no way to ensure that you would be covered in the event of a claim”.
2. Not getting advice from your broker when deciding to enter a different market
A new market can mean importing products from overseas to sell in Australia, selling online within Australia or overseas, or exporting to international markets. Elliott says “entering into new markets can also mean exposing your business to new liabilities. For example, importing products into Australia can have liability issues where the importer can be deemed the manufacturer so any property damage, physical injury, or death, as a result of the use of your product, you can be held liable for. Many retailers and online distributors assume buying a product from overseas is no different to buying and selling one from Australia; however this is definitely not the case.”
3. Under-insurance & inadequate business interruption insurance
Businesses in Australia are under-insured. In a report by Cameron Reasearch Group, The Australian Small Business Market for Financial Services 2012, found that a staggering 65% of small businesses do not have business interruption or loss of profits insurance. The report also revealed that:
- 80% of businesses do not have machinery breakdown cover
- 76% do not have computer or electronic equipment breakdown insurance
- 33% do not have burglary cover, and
- 16% do not even have fire insurance
Elliott states that these figures are extremely alarming and “what these statistics mean is that the majority of businesses with insurance would still go bankrupt following an insured event”.
4. Failing to collate evidence as soon as an incident happens
If you want to increase your chances of an optimum claim, you need to make sure that as soon as an incident occurs, you collect as much evidence as possible. It can be wise to have procedures in place so that your business does not miss out on a claim.
For example, in the event of an accident, your business will need to produce an incident report to your insurer. It is also a good idea to take photos of any incidents such as flooding or physical damage as soon as they happen in order to help the insurer with prompt action on the claim, and help refute any conflicting evidence.
5. Failing to understand the definition of gross profit
When insuring your business, it is important to understand that gross profit for an insurer is different from the definition your accountant gives you. The definition for an insurer includes the wages which you pay to your staff, meaning you will be able to pay them wages in the event of an insured event.
6. Reducing premiums when times are tough
Some businesses may think it is a good idea to reduce the insurance expenses during a rough patch.
Elliott Insurance Brokers announced on Twitter that “if you think you can’t afford insurance, you definitely can’t afford not to have it”.
In addition, Elliott says “reducing premiums in nearly all cases also means reducing cover and if a business is struggling financially, you must consider the implications of this to your business in the event of a claim”.
7. Not understanding exclusions, warranties and endorsements
Insurance brokers are there to help. If you do not understand the fine print of your insurance policies, do not hesitate to ask your advisor to clarify. There is nothing worse than being caught out for not understanding that you were not insured for a specific item. It’s always better to query any doubts about your policy coverage before a claim. After the fact there is nothing that you or your advisor can do to remove or correct any issues with exclusions and endorsements to the policy.
8. Being your own insurance broker
Whilst using a search engine to find out about insurance protection can be great to get some background knowledge or see what is out there, Google will not tell you the implications of your insurance choices and provide you with the personal, detailed, and professional services of a broker. You may end up with a cheap deal, but possibly very under-insured and struggle in the event of an insured (or not insured) event. An insurance broker will make sure that the business is covered for its specific needs.
It is important to make sure that you seek professional advice when dealing with such important financial aspects of your business. A broker will understand how important your business is to you, will have experience from dealing with businesses in your industry, can inspect your business for risks, and provide you with options of cover that will cover it for potential events.
John Elliott advises us with the fact that “many clients come to a broker for the first time with a mindset of saving some money getting the broker to shop for the appropriate policy, however after this it is important to utilise your insurance broker for the professional advice that they can offer throughout the journey of your business growth”. Business growth can be a very exciting time, however, never assume that the current cover you have for your business will suffice as your business grows.
If you think you might need to review your insurance policy or check your cover, contact Elliott Insurance Brokers today to discuss if your insurance program is adequate for your business.
