Insurance can be a tricky business when trying to secure it yourself, especially if you aren’t familiar with all the terms and tricks – check out our Jargonbuster here and see what I mean!
Beyond that, it only takes one miscalculated detail to derail an entire claim, which is why we handle a lot of the paperwork on behalf of clients and help them find the correct information for us to use. This makes sure every eventuality is dealt with, and they can walk away feeling secure with their new insurance.
Which is… kind of the point of insurance in the first place!
When preparing all the paperwork for an insurance company, there are two big things to bear in mind (among many smaller things…) to avoid losing out when it comes time to claim.
Your duty of disclosure
When you apply for your insurance (or when we do on your behalf) it is very important that you give all the relevant information about your business. If you fail to do so this could affect a claim or your cover going forward. This is called your duty of disclosure.
The key points to note are:
- You need to get your hands on all easily available information in the business that could be relevant to a claim in future.
- You have to include all relevant knowledge of the ‘senior management’ of the business – most likely you!
- You need to ask any relevant third parties involved with the business, including external consultants, contractors and anyone insured by the policy, for any information that might be relevant.
- Your application must be clear so that the insurer can take a view on the risk. In other words, don’t try and hide things.
- You also need to highlight unusual activities and/or known areas of concern that could affect the risk. Again, don’t try and hide things.
Tricky word ‘Relevant’, which is why we highlighted it. This is where a broker can come in very useful – dealing with claims for similar businesses regularly, we know in much more detail what actually is relevant and can guide you appropriately.
The duty of disclosure is a continuous one and so also applies to any changes in your business after you have bought the policy. For example, if one of your premises becomes unoccupied, then the risk from escape of water, vandalism or other perils increases and the insurer will want to know about this change.
In other words, keep it up to date, or your claim might not get paid.
In such circumstances, insurers usually allow the premises to remain unoccupied for 30 days after which they may restrict coverage, impose certain new conditions such as requiring the property to be inspected every seven days or require an additional premium.
Again, in other words – there’s some leeway, but don’t push it!
Guard against underinsurance
Underinsurance might just seem like it’s an excuse for insurers to sell more coverage, but believe it or not, this isn’t the case. There’s an important reason why all businesses should consider underinsurance seriously – it can significantly affect a claims payment following a loss.
An example of being underinsured would be to understate the actual amount of stock or turnover. It’s incredibly important that a growing business makes sure it has the appropriate level of cover as it expands – something we ask and advise clients about each year on renewal.
Similarly if a business is changing, it’s a good idea to check that they don’t have too much cover – this one can actually save you money each month!
In the event of underinsurance, there are two routes that an insurer may choose to take:
Charge an additional premium
The premium is recalculated based on the actual amount of stock or turnover and the necessary additional premium is charged. The loss would then be paid in full. Nice as this sounds, it doesn’t always happen, so it’s not a good idea to rely on.
Apply ‘the ‘Condition of Average’ to the claim settlement
Alternatively, an insurer may reduce the amount of the claim payment in direct proportion to the amount of underinsurance. This is known as applying ‘average’.
For example, if a business was underinsured by 50% and suffered a loss of £40,000, the application of average would reduce the claim payment to £20,000.
You don’t need to be an insurance expert to know this can be an expensive mistake to make.
This is why it’s incredibly important to accurately assess the right sums insured you need for your property, contents, stock and turnover.
Finally, for business interruption cover, it’s worth spending time to assess the time it would take for your business to actually fully recover in the event of a significant loss. Businesses frequently underestimate this when selecting their indemnity period – which again, is an area we have experience in and can advise on to keep you safe.
If you’re unsure of how your policy covers you for these potential problems, please get in touch with a member of our team at Weir. We’ll review exactly what you’re covered for based on your policy conditions. Just call us on 01670 365620.