Is your small business among the one in four that say they’ll go under if faced with a liability claim? Or lose clients, expect less revenue and have cash flow woes.
What does underinsurance mean to business?
Having inadequate cover to protect your operations could put you out of business. Underinsurance, or having the incorrect cover, relies on you having funds to address shortfalls in the event of a loss or claim.
A key example
It’s vital to know the difference between the ‘insured amount or limit of liability’ and ‘total declared value’ of an insured asset.
Why people commonly underinsure
It’s easy to underestimate the costs to fix, rebuild, or replace your contents or property, including:
- Guessing their value
- Higher building materials and labour costs, and more stringent building codes
- Temporary accommodation costs, if needed
- Neglecting to list garages, sheds, car parks or other structures on your policy.
Another issue is that some business owners don’t think the worst-case scenario could happen to them. Tap into your network to ask other operators about their experiences with underinsurance and how they dealt with it.
Steps to avoid Under insurance
Using a quantity surveyor is a good start, but the key is conducting regular reviews of your coverage. Policy fine print can change over time, meaning gaps in your coverage could emerge.
Identify risks to your business, actively work to minimise their effects on your operations and develop a robust business continuity plan.
If you would like to know more about avoiding under insuring your business, please CLICK HERE, or contact us for more information.