A Necessary Investment

A Necessary Investment

March 2, 2014

Insurance is a commodity that people either love, or hate. In recent natural disasters in Australia, some have seen insurance as a godsend, assisting to get their businesses back up and running. Others see it as being “unnecessary” and some still have the opinion that “it will never happen to me”. These events have highlighted the issue that many Australian businesses are either underinsured or not insured at all, and therefore the importance of having appropriate covers in place.

The insurance industry in large has commented that underinsurance is a major issue in Australia and in reality most businesses should review their insurance yearly, to ensure that they are adequately insured. Most policies have a replacement value option, which basically means in the event of a claim they will replace the item in today’s dollars. Unfortunately, some businesses have had insurance policies in place for some time, without reviewing their cover. With recent increases in building, fit out and replacement equipment costs, these existing sums insured may be inadequate creating a situation of underinsurance upon a claim.

Businesses need to look at insurance as not just another expense, but as a necessary business investment forming part of their planning and budgeting. There are many aspects of a business that require different types of policies to cover your risk exposure; one policy does not cover everything. A simple business pack policy has many sections, and unless you select these individual sections, you may not have cover. People focus on more common sections such as Fire and Perils, Theft and Public and Products Liability; whilst other important covers such as Business Interruption and Machinery Breakdown are often forgotten or excluded. In addition to the above, some other sections which can be added to a Business Pack policy include; Glass cover, Money cover, General Property cover and Tax Audit cover.

Insurance companies look at many facets of a business when determining what covers they can provide and the applicable premiums for these covers. An example is one coffee shop may have a deep fryer installed, and another may have no cooking equipment at all. From a fire risk point of view, both these businesses whilst primarily in the same industry, they would be rated completely different. From a risk management point of view there are some factors that insurers look for, which will ultimately assist in reducing the premiums you pay. Some basic examples of these are: good fire protection, good building security, good housekeeping and well trained staff.