Key Insurance Pitfalls to Avoid for Growing Businesses
As your business grows and changes, it is essential that you regularly review your insurance policy to ensure that it remains aligned with your evolving needs and circumstances. Failing to update your policy accordingly can expose you to risk and create setbacks when making a claim, such as potential denials or insufficient compensation.
Here we highlight some common insurance pitfalls that a growing business should avoid to help safeguard its operations and facilitate long-term financial stability.
1. Underestimating Coverage Needs
Underinsurance has been an ongoing issue in Australia for some time, driven by several factors such as inadequate risk assessment, insufficient understanding of policy terms and coverage, incorrect sums insured and a focus on minimising costs rather than securing comprehensive protection.
Underinsured businesses face significant risks, such as financial strain, inability to recover from losses or damages, disruption of operations, and potential business closure. It can also lead to unexpected expenses, contractual challenges, and reputational harm should a claim be made against them.
Conducting a thorough risk assessment and working closely with your insurance broker can be essential in accurately determining the required coverage types and policy limits for your circumstances and help to avoid out-of-pocket expenses at claim time.
2. Not reviewing policies and risks regularly
Failing to review insurance policies regularly and having no formal risk assessment process can expose your business to new risks and lead to inadequate coverage as the business evolves.
It is essential for growing businesses to reassess their insurance policies annually, or whenever a significant change occurs, for example, you purchase new equipment or expand your operations overseas. This includes reviewing policy terms, exclusions, and endorsements to ensure they align with current operations and risk exposure.
3. Having inadequate cover for business activities
Having the right type and level of insurance coverage is an integral part of establishing a reputable and sustainable business and minimising risk. If your policy does not adequately align with your business type, industry, or profession, this may leave you open to unexpected financial losses and legal liabilities should something go wrong.
Many businesses also overlook the importance of professional liability insurance, assuming it is only necessary for specific professions. However, any business that provides professional services or advice can face potential legal claims.
Seeking professional advice and taking the time to properly understand the coverage you need for your business can help to ensure you take out a policy that covers the full scope of your business activities and professional risks.
4. Not seeking professional advice
Attempting to navigate the complex landscape of business insurance can be overwhelming without professional guidance. Consulting experienced insurance brokers or risk management professionals can be crucial for identifying coverage gaps, understanding policy terms, and securing the more suitable insurance solutions tailored to your specific business needs.
How Coverforce can help
Consulting with an experienced insurance broker can be instrumental in helping businesses make informed decisions when arranging their insurance and avoid common insurance mistakes.
For personalised risk advice and tailored insurance solutions to meet your specific needs and budget, contact your local Coverforce Office Coverforce Office or call 1 3000 COVER to speak with a risk expert today.
The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact Coverforce directly.
REFERENCES
Insurance mistakes your business should avoid
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