Don’t Make These Mistakes When Insuring Your Business
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Your business represents possibly the greatest enabler of your lifestyle and likely your primary source of income. It’s your independence and your legacy.
So then, why is it that so many business owners make such bad decisions when it comes to insuring this rather prodigious investment?
Whether through a misunderstanding of what different cover types entail or sheer short-sightedness, it’s unfortunately common for South African business owners to find themselves inadequately covered when it comes time to make a claim. As you might well imagine, this can have disastrous short- to medium-term consequences for that business and its operations. In the case of small businesses, such consequences can be crippling and have the potential to sink any hope that an organisation may have otherwise had of succeeding.
So, as a business owner facing difficult times and a turbulent economy, what should you keep in mind when reviewing or selecting your business insurance policy?
Prioritising insurance price rather than value
Business insurance is more than just another product. It’s not simply an expense whose worth is defined by how well it fits into your budget. And, above all, it is not a one-size-fits-all solution.
Your business is unique; its industry, risk profile and operating environment all demand individual consideration. This requires an insurance provider or broker who will take the time necessary to understand your business’ situation and needs and craft a policy tailored to meeting them.
Not getting the right kind of cover
Ultimately, the reason you’ll want to consult with your insurer or broker, is to make certain that you are investing in cover that is applicable to your circumstances. As an oversimplified example, consider the value in purchasing vehicle insurance for a business that owns no vehicles and whose staff are rarely or never required to travel.
That might seem like an incredibly obvious mistake that you’d never make, but you’d be surprised at how easy it can be to invest in cover options that are irrelevant to your commercial interests. Depending on the details of your business activities, it is entirely possible that an experienced insurer who’s taken the time to understand what you need might recommend against any number of cover options that you might otherwise select by default.
Not insuring against disasters
It’s easy to assume that disasters are uncommon enough that they’ll never happen to you; until they do.
Storm, fire and other disaster-related damages might be exceedingly rare, but they’re rarity is more than matched by the long-term implications of the damages that they can result in. Between fires, flooding and storm damage, South Africa’s been beset by more than enough examples of natural disasters over the past few years for all of us to be familiar with the unexpectedness with which they can strike – as well as the enormous and far-reaching damage that they can inflict.
You might not want to think about it, but try and imagine the untold damage that could be done by a fire raging through your business premises. Even with fire-prevention and suppression systems in place, the resultant water, smoke, and fire damage could well leave your business inoperable.
Not getting business interruption cover
That brings us to our next point: business interruption cover.
If, heaven forbid, disaster does strike and your business is left reeling in its wake – effecting repairs, replacing equipment, etc. – it’s entirely possible that you will lack the on-hand capital to keep yourself afloat and manage day-to-day expenses without assistance while you recover.
Business interruption insurance covers you for the loss of income should such a calamity befall you, fortifying you against the possibility of having to close your doors forever due to a one-time calamity.
Not giving your insurer enough information
Oftentimes, a prospective buyer of insurance will try to fudge the numbers and keep pertinent facts from the insurer, in hopes of securing lower premiums.
Unfortunately, this is a very short-sighted approach that could come back to haunt you when it’s time to make a claim.
When all is said and done, you and your insurance provider or broker must work together to determine the best policy composition for meeting your risk needs. You can’t do that if you are not transparent about the realities of your industry, your business context or your daily operations.
It might seem like a good idea in the short term to keep information from your insurer that might save you on your monthly payments, but it won’t seem like such a good idea if and when you make a claim that your insurer cannot accept.
Not regularly updating your policy
Of course, not every oversight is intentional or informed by ulterior motives. Sometimes, your insurer lacks all of the relevant information because you have failed to timeously update your policy to reflect the growth and changes your business has undergone.
Have you moved premises? Purchased an expensive and important piece of equipment? Added more vehicles to your fleet?
All these and more represent information that your insurance company needs to have if they are going to be able to provide you with the best, most comprehensive and applicable cover options available.
Some business owners will review their policies on an annual basis. Others will barely make a move without making sure that their insurance company knows what it is and has advised them on it.
Whatever course you choose though, it is of utmost importance to keep your business insurance company in the loop when making any decisions that increase or otherwise alter your risk profile.
It should be clear by now that purchasing insurance for your business requires more thought than restocking office supplies. It’s an important decision and one that should be well-considered before settling on the option that best suits you.
Seek advice from this and other online resources, and make sure you’re as informed as you can be before making any decisions that you may come to regret.