While Australian business owners know that commercial insurance is a necessary part of protecting their livelihood from unexpected loss, the majority of businesses nationwide remain underinsured.
Only 43% of SME’s believe they are completely covered for their insurable business risk.
Uninsured and underinsured businesses risk business failure following a serious event.
Underinsurance can have a devastating affect on business owners, as in most cases they will not realise they are underinsured until they have to make a claim. By this time it is too late to rectify the situation, which many Australian business owners have discovered in recent years following major natural disasters such as floods, storms, bushfires and cyclones.
How to Avoid Underinsurance
As part of your business’ on-going risk management strategy, it’s imperative that you constantly review your business insurance policy, including your Policy Limits and Sub Limits. This review shouldn’t be left until Policy Renewal time, but any time your business evolves and asset value changes, for example if you make renovations or upgrades to your building during the Policy ‘Insurance Period’.
You should get in touch with your broker to discuss Policy Limits following any purchases or disposal of assets. It’s also sound practice to ensure that your level of coverage represents a minimum of Replacement Value.
Who Can Help To Ensure You’re Not Under Insured
Insurance is designed to restore a business to the position it was in before the loss and to reinstate the business on a like-for-like basis. Without a formal valuation, the likelihood is that insured values may be based on incorrect advice and false assumptions. Reviews should therefore be conducted in consultation with your insurance broker, who will ensure your Limits of Coverage are adequate.
Property and Business Valuers are also a real asset when setting these figures. Furthermore, specialist insurance areas such as Business Interruption may require the assistance of accountants, financial advisors, or both, to ensure complete accuracy with any calculations.
Speak to your PSC Insurance Broker if you’re worried about your business being underinsured, or if your business’ financial situation has recently changed.
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.
