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Don't fail to identify the risks that could put you out of business when applying for commercial insurance. Pictures: 123RF/rawpixel
Don't fail to identify the risks that could put you out of business when applying for commercial insurance. Pictures: 123RF/rawpixel

The importance of business insurance cannot be underestimated. It safeguards your livelihood by ensuring you can keep your enterprise afloat should something disastrous happen unexpectedly.

That’s why it’s essential to be aware of common risks that could affect your chances of success should the need to claim arise — being prepared could keep you in business, says Jurgen Hellweg, CEO of Western National Insurance. 

With that in mind, here are three of the most frequent reasons a commercial insurance claim may be repudiated or not paid out adequately:

1. Not working transparently with a qualified adviser

The types of risks a business owner faces may vary enormously depending on the industry they operate in. There may also be hidden risks you may not think of when taking out insurance. 

That’s why it’s best to work with a qualified commercial short-term insurance adviser to ensure you get adequate cover. They have the expertise to tell you the appropriate insured values and how to structure your excesses to best suit your cash flow. 

Hellweg says it’s vital to be honest and open with your adviser, and therefore your insurer, about everything from your history to any changes that may need to be factored into your cover.

“Consider, for example, a building owner who has business tenants. At the time of taking out cover, the details of the tenants were declared to the insurer who assessed the risk as being acceptable for the premium charged. Over the period of the year, there is a change in tenants, where the new tenant may be considered a higher risk. By not declaring any changes during the period of insurance, any claims — such as damages from a fire to the building — may be rejected.”

2. Failing to identify risks that could put you out of business

The type of risks that may affect your business don’t always jump out at you and, if they do, you might be tempted to skimp on the cover because those risks are based on an event that’s unlikely to or seldom happens.

“The impulse is to insure those day-to-day risks, which will probably never put you out of business, but that happen on a regular basis. Having your cellphone stolen, for example. But what will you do if the unthinkable happens and your entire business is destroyed? Only insuring your cellphone will be your biggest mistake,” says Hellweg.

“Interestingly, the cover for a huge loss is actually not as expensive to take out [as for more common risks], and will be worth so much more than the price you pay should you ever need to use it.”

3. Not maintaining your assets

Any assets you insure from your buildings and vehicles to your equipment and machinery must be maintained for your insurance cover to be consistent. 

“Maintenance falls on you, the business owner. Failing to keep up maintenance is likely to result in a claim being rejected as elements such as wear and tear are possible to detect at claims stage,” says Hellweg. “There would be nothing worse than receiving no payout simply because you didn’t service your vehicle, which led to a malfunction or accident, or not repairing a leak in your building’s roof, which led to a bad flood.”

“It is best to keep up your side of the deal and to build sound relationships with your insurer and broker — this will give you peace of mind and can certainly go a long way to keeping you in business,” he says.

This article was paid for by Western National Insurance.