In the wake of the floods that devastated parts of Queensland and Victoria in early 2011, a government review was conducted around natural disaster insurance. It covered many angles of the complex issues that surround natural disasters and insurance, and Chapter 7 provided a telling picture on how small businesses handled some of their insurance matters when it came to natural disasters. Although many important points were raised, several were especially illuminating on how small businesses consider and utilise natural disaster insurance.
Protecting Your Business Against Natural Disasters
In light of the recent events that plagued Australian shores, natural disaster insurance has been able to largely handle the claims arising from each event. From the Victorian bushfires in 2009 to the hailstorms in Melbourne and Perth in 2010, generally, insurance has covered the losses.
However, the review raised an important gap that businesses have with their natural disaster insurance coverage: flood. Most insurance policies cover small business property against damage from threats like fire, theft or stormwater, but it was noted that the vast majority of small businesses are not protected against floods.
Business Insurance Tends to Be Customised
Naturally, the risk profile from business to business varies, especially around their location and the threat of particular types of disaster events. This makes “cookie-cutter” insurance useless and customisation a necessity if a business is to maximise their protection from insurance.
And this is what appears to occur in most cases. Unlike the commoditised home insurance market, small business insurance policies are often more tailored to meet the needs of the business taking out the policy. This means mixing different insurance policies into a single package, from business interruption to professional indemnity to natural disaster insurance.
Business Interruption Insurance: Important in Natural Disasters
Business interruption insurance can also provide protection when natural disasters strike. However this policy is under-utilised across Australia. The government review reported that only 40% of small businesses have business interruption insurance, and an even smaller fraction include flood protection. Despite some limitations around the insurance (for example, it may not cover indirect effects), this type of insurance can help a business cover the costs of not being able to trade while it repairs premises, restores stock or any other necessary activity in the wake of a disaster.
Business Owners More Likely to Insure Their Homes
Insurance plays a part in every business plan, but according to the review, not all small business owners decide to take out insurance. The very low rates of home-insurance indicate that business owners tend to prefer insuring their homes more than their businesses. And while many businesses lease, this doesn’t fully account for the discrepancy, which leaves those unprotected businesses vulnerable when the next natural disaster strikes.
While insurance may not always seem the highest priority for some small businesses, the recent catastrophes have shone a light on how businesses use (or fail to use) insurance to protect themselves. With disaster events appearing to increase every year, prudent use of natural disaster insurance and other policies may prove an excellent investment for many a small business.
PSC Insurance not only advises businesses of all sizes on their insurance matter, they provide a host of insurance-related services. Contact us today for more information.
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