Could You Be Crippling Your Business With Underinsurance?

Being underinsured can devastate a business, but it is much more common than you might think. With 97% of New Zealand’s businesses classified as small to medium sized and more than 2/3rd of these having less cover than they require, underinsurance is a very significant issue. Having a small team or a solo operation means that time can be spread thin and tasks like keeping your insurance policies current can slip through the cracks, but incorrect levels of cover can cripple a business when it comes to claims time.

Here are a few questions to ask to determine if your business may be underinsured:

1. Have there been changes to your assets since your insurance was last reviewed? Small businesses are usually busy, sometimes growing and evolving rapidly with new assets being purchased without thinking to review insurance policies. If this strikes a chord, it could be a good time to review your existing schedules, making sure they accurately reflect your current position. 

2. Do you feel confident the correct cover was purchased at inception? Has your cover been crafted to meet the unique needs of your business or are you unsure if your current insurance is the best possible solution? This is where it can be invaluable to speak to a broker, who can thoroughly assess your business risk and use their specialist knowledge when it comes to selecting your policies.

3. Have replacement and rebuild costs risen since you last reviewed your sums insured? The cost of rebuilding or replacing your assets is always rising and if cover is not being regularly reviewed, when it comes to claims time the settlement may not be sufficient for the replacement or rebuild, leaving your business to cover the rest. 

4. Have you considered Business Interruption Insurance? If your business was unable to trade for 12 months following an insurable event, would you be able to recover? When you suffer a business interruption, the financial loss can be more devastating than the physical loss. Business interruption insurance, also known as ‘business continuity' insurance; ensures that you minimise the financial impact on your business when an interruption to your normal operations occurs after a physical loss of business assets. 

5. Realistically, should disaster strike, are you confident your insurance will respond, or is your business taking on unnecessary risk? Sometimes businesses underinsure in an attempt to reduce premiums, which can be problematic in the event the unthinkable should occur. If you have concerns that you could be underinsured now is the time to speak to your broker to review your insurance program before it’s too late.
6.Is Cyber Insurance relevant for you? As the largest emerging insurance market and often the most underestimated, due to loss of data and breach of systems, even if your business doesn’t involve trading online. Approximately 60% of SME’s that faced an attack would be forced to shut their doors. Cyber Insurance could be essential to keep your business running in the event of an incident. 
If you have uncertainties about your current insurance program, now is the time to check. Underinsurance can be easy to ignore, until it comes time to make a claim. While being comprehensively insured doesn’t make problems disappear, it can make all the difference to getting your business back on track. A broker will review every aspect of your business insurance requirements, advising you on not only the correct products to purchase but providing you with Risk Management advice that can help prevent and mitigate risk at the outset. Speaking to a professional is just good business.

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General Advice Warning
The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.

Insurance Advisernet , March 19 2019

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