Your business is undoubtedly one of your most valuable assets.
It’s the culmination of your hard work and dedication, and it plays a pivotal role in your financial security.
Ensuring that your business remains robust, especially in times of uncertainty, is essential.
In Australia, inadequate cash flow is one of the leading reasons why small businesses fail.
This is where having the right level of insurance can be a game-changer, helping to ensure your business continues to operate smoothly if the unexpected happens.
The risk of underinsurance
It’s alarming to note that 1 in 10 Australian businesses with insurance don’t have sufficient coverage to protect themselves against business disruptions, legal liabilities, or damage to their assets.
This is referred to as ‘underinsurance,’ and it poses a significant threat, increasing the risk that a business might have to shut its doors if something goes awry.
- Focused on Low Premiums: One of the common reasons for underinsurance is business owners being lured by low premiums. They sometimes rush into purchasing insurance without carefully assessing if it adequately safeguards their interests after an insurable event. Consequently, the sum insured may fall short of covering the actual losses, or policy terms might limit the recoverable amount.
- Underestimating Replacement Costs: Another pitfall is the tendency for business owners to underestimate the reinstatement or replacement costs of their business assets (i.e. mobile plant and equipment) following a disruptive event like a fire, theft or storm. If the sum insured fails to reflect the up-to-date reinstatement or replacement cost, owners find themselves underinsured, potentially facing substantial out-of-pocket expenses when they need to make a claim.
How do you know if you are underinsured?
You are at risk of being underinsured if:
- Outdated Coverage: You haven’t updated your insurance cover to keep pace with your business’s growth. As your business expands, so does its value and assets. It’s imperative that your insurance coverage evolves in parallel to ensure comprehensive protection.
- Inadequate Replacement Cost: Your insurance is based on an outdated replacement cost of your business assets. Given the fluctuations in asset market values due to supply shortages, it’s vital to periodically reassess and adjust your coverage to match current replacement costs.
- Limited Scope: You are covered for damage to your business premises but have not considered other forms of financial loss, such as business interruption and management liability. Business interruptions, legal issues, or management liabilities can severely disrupt your operations. Neglecting to include these in your insurance coverage leaves you exposed to significant risks.
How can HMIS help?
Sorting out your insurance cover often finds itself at the bottom of your never-ending to-do list. This is where our expertise can be invaluable. We are dedicated to doing the legwork of reviewing your insurance strategy, adapting your coverage, and giving you the assurance that your business is appropriately insured.
Remember, insurance is not merely an expense; it’s an investment in the security and longevity of your business.
By addressing the common pitfalls of underinsurance and regularly reviewing your coverage, you can minimize the risk of financial hardship and secure the continuity of your business.
So, take the time to evaluate your current insurance situation and seek professional guidance when necessary, because the future success of your business may hinge on it.
Get a free review of your insurance policy and talk to the team at HMIS today on 1800 629 701.
