While the Hunter has been spared the recent flooding, the devastation facing businesses in other parts of NSW is a timely reminder about the importance of insurance for your business.
We insure our cars and health but many business owners, despite making a significant personal and financial investment in their business, fail to either take out insurance or they underinsure. Either way, this can affect your ability to resume trading after a disaster.
There are many types of business insurance but today I am just focusing on property and asset insurance. There are policies for fire and other perils, business interruption, burglary as well as insurance to cover goods and property in transit. Such insurance can cover the costs associated with the repair or replacement of your building, equipment, furnishings, fixtures, stock, and business records as well as your resulting reduction in turnover.
Shop around various insurance companies and brokers to find the cover and premium that is best for your business. Your industry association may have special member deals or recommendations. There are packages tailored for specific businesses or industries. Remember to read the fine print. Some premiums look great because they exclude certain events. There can be a difference between storm coverage and flooding coverage. If you already have insurance, check your policy for exclusions and update if necessary.
According to the Insurance Council of Australia, 50% of small business buildings are severely or significantly underinsured, and 20% are not insured at all. Around 40% of sole traders operate without any insurance cover. Underinsurance is often unintentional. One of the most common mistakes by business owners is undervaluing the replacement cost of assets.
While insurance can give you peace of mind, prevention is always better than cure. Taking steps to minimise the risk of these acts happening in the first place is vital.
Greg Taylor is Chief Financial Officer for the Hunter-based Greater Building Society
This article appeared in the Newcastle Post, March 14 2012