Insurance to Protect Your Business

5. How to Buy Effectively

Once you have assessed the risks to you and your business, you need to work out how much cover is needed and what steps you need to take to gain cover.

5.1 Calculate how much cover you need.

Insufficient cover is one of the main reasons insurance claims are not paid in full.

  • If you under-insure, your claim will be reduced by a similar proportion. For example, your claim will be reduced by 10% if your cover was 10% less than it should have been.
  • Always insure your assets for their cost price. If cost prices vary, make sure you have cover up to their highest levels.
  • Your policy should protect against inflation and sudden increases in the value of your stock, equipment or liabilities.
  • When calculating all cover requirements, always allow for projected business growth.

5.2 Make sure you are fully aware of the terms and conditions of your insurance and that the insurance meets your business needs.

  • You must disclose everything ‘material’ to your application. For example, past thefts, bankruptcy or insolvency, or if an insurer has refused to cover you in the past.
  • Most policies require a minimum level of security. For example, you may have to install a burglar alarm or sprinklers according to your insurer’s specifications. Your insurer may send an insurance surveyor to assess the risks and recommend improvements before giving you cover.

5.3 All insurance policies – even all-risks policies – have exclusions. For example:

  • Equipment failure due to wear and tear is not covered.
  • Theft insurance excludes shoplifting.
  • Building insurance may exclude subsidence cover, unless it is specifically requested.

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