Business development · 9 May 2019

Is your business at risk of being ‘under-insured’?

insurance tax

The business insurance policy that you take out should be completely dependent on the type of business you run. This can extend to what product or service you provide or deliver, the number of staff members you employ or even where your commercial premises are located. Unfortunately, the culture of cost comparison sites has resulted in many business owners focusing only on price of their insurance policy, not paying enough attention to what cover they’re getting. It’s easy to fall into the trap of purchasing the cheapest business insurance without ensuring that you’re fully protected against the various risks that you are exposed to in running your business.

As a result, when you do need to fall back on your insurance, you risk having your claim refused because you weren’t covered for the right things or because the level of your cover was insufficient.

Business costs

In this scenario, the cost to your business could be devastating. For example, if you have to pay damages to a client who sues you for doing something wrong or blames you for an accident, a very substantial amount of money could be involved and without the correct insurance, your business may not be able to recover.

That said, under what circumstances might insurance providers refuse claims? And what can you do as a business owner to make sure this doesn’t happen to you? Claim Refusals There are many reasons as to why your insurance provider could reject your claim.

The most common is that the policy was not in force when the event that you’re claiming for occurred or that the policy is or was invalid because you didn’t tell the truth when you applied for the insurance, or failed to disclose something which could affect your claim (for policies taken out, renewed or changed before 6 April 2013).

In addition, certain insurers will refuse your claim because some information was deliberately or carelessly withheld, misleading your insurers as a result (for policies taken out, renewed or changed after 6 April 2013), or your business has drastically grown and you have failed to tell your provider about your change in circumstances.

Make sure your information is detailed and comprehensive

Hence, it is extremely important that all information given to an insurance provider is as comprehensive and detailed as possible.

Other key examples of claim refusal include certain situations or items not falling under your policy cover, an exclusion clause in the policy which means that you can’t claim for what’s happened or missing installments of your insurance premium payments over the year.

The message here is clear and simple: Be honest and upfront about every aspect of your business when taking out of your policy and arrange your insurance through a provider who understands the particular type of business that you are in and feel free to ask questions about anything you’re unsure of.

Partial Pay-Outs

There may be scenarios when your insurer may only agree to pay a partial amount of your claim.

This is likely to be because you have under-estimated the total value of your claim and do not have enough insurance to cover your losses, resulting in you being ‘underinsured’. Your insurer may issue a statement that you have put an unrealistic value on your claim and will only pay you part of it.

Insure your items for the correct amounts

It’s important to make sure that you insure your items for the correct amounts. If you insure for less than you should, then your claim could be scaled down proportionately. If you have a new for old policy, you should always insure your items for the amount it would cost you to replace them as new, regardless of the fact that their present market value may be far less if you may have had them for some time.

For some things, insurers may place a limit on what they will pay for any one item and in some situations, the claim may not be worth it due to the amount you have agreed to pay as an excess. Uninsured Losses Occasionally, there are scenarios when businesses experience ‘uninsured losses’, where certain eventualities will not be covered by your policy.

For example, a power cut may mean that you were unable to operate for a short period of time. However, loss of trade that you suffer as a result won’t be paid by your policy unless you have specific cover for this type of occurrence, called failure of public utilities cover.

Investing a little time in looking at your policy documentation could make a substantial difference to the running of your business, preventing ‘uninsured losses’ and unexpected expenses.

Ultimately, having the right insurance policy protects you against the risks you face. But being unsure of the types of cover you need or taking risky shortcuts could have a very detrimental effect for the long-term.

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ABOUT THE EXPERT

Jen Davies is a Senior Customer Service representative for Salon Gold, experts in insurance for hair, beauty, holistics, health and fitness. Designed for salons, clinics, gyms, spas and freelance or mobile professionals.

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