One of the largest risks facing small business owners is a failure to ensure an adequate level of insurance cover for their company – this is particularly true of small businesses who may not quite have the resources to cope with the large financial losses which may be suffered as a result of ‘underinsurance’.
A UK study recently estimated that around 80% of businesses may actually be underinsured, and this figure is only likely to rise given the unprecedented volume of new businesses which are forming by the day in the UK.
As commercial insurance can be a somewhat dry and complicated topic, it is often overlooked by business owners eager to focus their efforts on lead generation, sales, customer service and production.
This is an understandable, yet extremely dangerous view to take, particularly in the modern era.
Unfortunately, claiming that you were ‘unaware’ that you lacked the correct insurance cover will rarely stand up in a court of law, and you must therefore take the time to ensure you are knowledgeable of exactly what is included in your business insurance policy, and what has been omitted.
This needs to be undertaken on a regular basis.
Never take the risk of waiting for a major financial loss before inspecting your insurance cover – instead, analyze your business insurance carefully, and determine whether you currently hold the correct level of coverage, in relation to the risks that are present in your individual business or industry.
Underinsurance is quite a basic concept – it simply means that your insurance schedule is valued lower than the sum of your company’s total assets, and you risk receiving less money in compensation than you require to restore your business to any pre-loss standing it may have held.
The primary reason for inadequate coverage among business owners is complacency – the feeling that ‘it will never happen to me’. However, this is demonstrably untrue, and this school of thought has led to many closed businesses, and a vast amount of unemployed entrepreneurs.
As well as ensuring an adequate level of coverage, it is also important that you update your business insurance accurately, on a yearly basis at the minimum.
The assets of a business can increase or decrease in value on a regular basis, particularly during uncertain economic times, and it is vital that your insurance schedule reflects the health of your business as it currently stands, and not as it stood twelve months ago or longer.
Take the time to undertake a full evaluation of your assets on a yearly basis before renewing your business easily avoided.
Businesses can be inadequately covered for many reasons, but it is important that you immediately examine your current level of coverage, understand the risks involved by remaining underinsured, and make the necessary changes to your business insurance, to ensure you minimize the risks involved with potential underinsurance.
It is often common for businesses to be inadequately covered on any commercial insurance policy, but UK insurers claim that the following policies are the most frequently underinsured – Property Insurance, Business Interruption Insurance, and Cyber Liability Insurance.
The good news is that you can take many immediate steps to ensure that your business is sufficiently covered for any potential eventuality which may occur.
Common ways of achieving this include undertaking regular valuations of all your business assets, consider the effect of inflation when initially taking out your cover, calculating a suitable indemnity period which will allow your business sufficient time to recover from any financial loss or shortfall, and reviewing your business insurance policy on a regular basis (preferably with legal insight), to ensure that your company is covered in the broadest possible sense.
Never underestimate just how important the correct level of insurance coverage is to your business.
You should be doing everything in your power to ensure that your company is adequately protected at all times, and ensuring sufficient insurance coverage is undoubtedly one of the largest measures you can take to achieving this – it is the foundation upon which all of your other business dealings should be built.