Reducing your insurance premiums, and saving a few dollars by carrying some of the risk yourself, is an option many take. And while the chances of complete destruction are slim, the consequences can be catastrophic, and this should be the focus for people when arranging insurance.
Always ask: could you or your business afford to pay the difference if you need to start over? As many as 70-80% of businesses are underinsured, and with every natural disaster that hits Australia, the news is full of people who have lost their homes and businesses and can’t afford to rebuild.
Always ask, “Could you or your business afford to pay the difference if you need to start over?” For businesses who deliberately underinsure, it may cost much more than they realise, with the fine print of their insurance policy leaving them further out of pocket than calculated when they took out the policy.
For example, if your business contents or stock has a replacement value of $250,000, and you take on the risk and only insure for $125,000 and only suffer a partial loss of $100,000, you will not necessarily receive the full $100,000 because your insurer may decide that as you have opted to take on 50% of the risk, it will only pay out 50% of the loss, leaving you to foot a $50,000 bill. Similarly using the same scenario, if you do suffer a complete loss, the $125,000 you need to find to restock the business, could mean the difference between getting back on your feet quickly and going into liquidation.
Both home owners and business owners can also be guilty of accidental underinsurance too, paying their premiums each year when it is due, without consideration to any change in circumstances over the previous 12 months. Take the time each year, tedious though it may be, to review your existing policy and assess whether you need to increase your cover. Did you build a pool or extension since the last policy? Did you get a flash new home entertainment system or expensive piece of jewelry? Or did your business upgrade its computers, trucks or warehouse equipment? Make sure you calculate accurate replacement figures for anything that has changed since last year. In the case of property loss, consider things like the cost of debris removal or other expenses. Businesses should also consider a risk audit to identify any potential dangers they may have missed. These could include business interruption or cybercrime.
It’s easy to arrange a risk assessment through Domina-BCIB to make sure you are properly covered in the event of loss – visit domina.com.au for more information.