What is underinsurance?
Underinsurance is when small business don’t have enough insurance to cover the replacement value of the tools or business assets they’ve insured. Unfortunately for most in the trade, they find this out when they go to replace their belongings, and the bill is larger than they expected.
When this occurs, most people dip into personal savings, borrow from family, take out company or personal loans or use a credit card, according to QBE SMEs and Insurance Report.
What can you do to prevent underinsurance as a small business?
- Take note physically, on paper or on your phone of the value of your tools. Tool Protect is a great app to protect your tools and if they are stolen or damaged, the app can assist you in preparing an insurance claim. Alternatively, take a picture on your phone of the tool and the receipt in store, make a folder and place the picture in the folder in case you need to make an insurance claim.
- Research your policy and understand what you are covered for exactly. This is the case for tool, motor, business Pak, injury and illness insurance (sickness and accident insurance). Read the PDF’s on each policy and work out how it relates to you and your tradie business. If you are still unsure call imar and ask questions, our experience team is available on 1800 284 627 and press 1.
- At policy renewal time, review your policy and make sure you have calculated the current value of your assets. Will your sums insured cover you for replacement at today’s prices?
What is the sum insured?
Sum insured refers to the maximum amount your insurer agrees to pay to replace your business property and assets, including buildings, contents and equipment, if they are damaged or destroyed.
The scope of damage covered can include burglary, vandalism, fire, natural disasters, extreme weather, explosions or industrial disputes or goods in transit.*
*Depending on your individual policy, check your PDS to determine which of the above mentioned you or your business is covered for.
Some of the reasons businesses give for underinsurance include:
- budgetary considerations
- feeling that premiums are too expensive
- the belief that no insurance can ever be enough
- overlooking some of their exposures
- failure to record current values in the policies up to date
- being too busy running the business
In summary there are many reasons why underinsurance for small business occurs and it’s important to work out how to avoid it, if you have further questions or need additional advice, contact our experienced friendly imar brokers on 1800 284 627 and press 1.