He explains that it is difficult to highlight why any single claim may be repudiated, or not be paid out adequately, because commercial insurance is quite different to personal cover.
“The types of risks faced by a business owner may vary enormously depending on the industry they operate in, however there are some key risks that any business owner can avoid to ensure a smoother and more successful process, should the need to claim arise,” he says. He spells out the top three risks:
Firstly: not working transparently with a qualified commercial short-term adviser. “As your business will have unique risks, an adviser is best placed to make sure you get adequate cover. While elements of running your business may seem simple, insurance is technical and there are hidden risks you may not think of.” An adviser knows how to calculate appropriate insured values and how to structure your excesses to best suit your cashflow.
Hellweg says the key is to be honest and open with your adviser and therefore your insurer - from your history through to any changes that may need to be factored in to your cover.
“For example, consider 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.”
Secondly: failing to identify the risks that could put you out of business. These risks don’t always jump out at you, and if they do, you might be tempted to skimp on the cover because the event is 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 which none the less happen on a regular basis. What will you do if the unthinkable happens and your entire business is destroyed?
“Insuring only your cellphone may prove to be your biggest mistake. Interestingly, cover for a huge loss is actually not as expensive to take out, and will be worth so much more than the price you pay should you ever need to utilise it,” Hellweg says.
Thirdly: not keeping up your part. Any assets that you insure, from your buildings to vehicles, equipment, machinery and the like must be maintained in order for your insurance cover to be consistent. “Maintenance falls on you, the business owner. Failure to adequately maintain your assets may result in a claim being rejected, as it remains possible to detect elements such as ‘wear and tear’ at claims stage.
“There would be nothing worse than receiving no pay-out simply because you didn’t service your vehicle, which lead to a malfunction or accident, or you didn’t repair a leak in your building’s roof, which lead to a bad flood,” Hellweg adds.
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 certainly go a long way to keeping you in business.
The office of the Ombudsman for Short Term Insurance adds, in a media release, that cash strapped consumers, during these tough economic times, sometimes attempt to save money by sacrificing their short term insurance cover by not paying their premiums. Should anything go wrong, this can make the consumer’s difficult circumstances immeasurably worse.
“For many, this is an interim solution with disastrous consequences. When claims are rejected because the premium has not been paid, consumers suffer the loss of the insured item. In many cases the insured item is a financed vehicle or a house that is subject to a loan. In such a case, the consumer still needs to repay the loan to the financier despite the item no longer being in use or having been written off as a total loss,” the release notes.
He lists the principles that apply to monthly policies: If no premium has been paid for a specific month, then there is no cover for that month. However, there is a period of grace. The Policyholder Protection Rules (PPR) have introduced a safeguard to give consumers who fail to pay a premium another opportunity to pay the premium in order to ensure that the policy continues to provide cover.
Rule 7.5 of the PPR provides that: ‘An insurer shall ensure that a policy contains a provision for a period of grace for the payment of premiums of not less than 15 days after the relevant due date, provided that in the case of a monthly policy, such provision must apply with effect from the second month of the currency of the policy.
Before taking the extreme route of cancelling one’s short term insurance policy, it is advisable to get at least three quotes from alternative insurers. Short term insurance is extremely competitive today, and at any one time, one or another insurer may become cheaper. It would also be preferable to downgrade from Fully Comprehensive to Third Part Fire and Theft cover on your car, rather than have no insurance at all.
The new year is the ideal time for businesses and consumers to review their insurance cover, as each year their needs and circumstances change and their portfolio should reflect those changes. Just like they take their car for a service or visit their doctor once a year to check that everything is still in order, policy holders should also consider regularly reviewing their insurance cover.
If there have been any changes in your life that may affect your policies, it is important to make your insurer, your broker or your adviser aware.
- BUSINESS REPORT