Whenever a major loss event happens in Australia – it’s only a matter of time before heart-wrenching stories emerge of the devastation experienced by uninsured households and businesses. Arguably even worse are the stories of those who thought they were adequately protected but weren’t, those who were underinsured.
Whenever a major loss event happens in Australia – it’s only a matter of time before heart-wrenching stories emerge of the devastation experienced by uninsured households and businesses. Arguably even worse are the stories of those who thought they were adequately protected but weren’t, those who were underinsured.
Whenever a major loss event happens in Australia – it’s only a matter of time before heart-wrenching stories emerge of the devastation experienced by uninsured households and businesses. Arguably even worse are the stories of those who thought they were adequately protected but weren’t, those who were underinsured.
What is Underinsurance?
When an individual or business has inadequate insurance to cover their legal liabilities or the full cost of loss or damage to their assets.
Why are so many underinsured?
Australia has long been considered one of the most underinsured nations in the developed world. There will always be some businesses that actively choose not to have insurance. However, the data shows there’s also a significant portion of underinsured businesses who have made no such choice and don’t even realise it. Typically, we find these tend to be businesses that choose to ‘go it alone’ and aren’t partnering with an insurance adviser. Perhaps they’re not fully aware of the risks they actually face? Maybe they’ve underestimated their sums insured should a loss event occur, such as repair or replacement costs for buildings, vehicles, stock, and other assets that have appreciated considerably in value? Have they accurately factored in the bottom-line impact if their business operations were interrupted for weeks, or possibly even months, on end?
Always know your cover.
They say ‘ignorance is bliss’. But when it comes to being underinsured, it’s to be avoided at all costs. Knowledge is everything. Our very strong advice is to take the time to review your risks at regular intervals, understand the details of your cover, and take whatever steps are necessary to ensure you are – and remain – one of the 38% of Australian businesses who are adequately protected.
Can the opposite be true?
Definitely – there are many situations where you are paying too much for insurance. This could be the result of still insuring equipment that you no longer own/require, moving premises and not adjusting the sums insured, purchasing a policy where an exclusion makes the policy redundant, or simply just estimated a rebuild cost incorrectly.
iMed Insurance were engaged by a General Practice Clinic to conduct a review on the exposures a GP Clinic faces, advise the insurances to eradicate these exposures, and provide alternative options on their Business Insurance program to ensure the cover was appropriate and the premium competitive.
The first step was to review the exposures of the clinic and identify the exposures that are prevalent in the day to day operations of the clinic.
iMed Insurance then identified the insurance policies that would respond to these exposures should a claim arise.
Where this review became interesting was when the existing policy listed $20,000 cover for ‘Machinery Breakdown’. iMed insurance attended the premises and requested the client identify the machinery that was covered under this section of the policy. The only item that was on the premises was a vaccine fridge worth $1,500. The client was paying around $500 each year for this cover and with a $500 excess applicable, it was determined that the client was not receiving value for money on that particular policy. As a result, deemed to be over insured in this instance.
When questioned why they have $20,000 cover for a $1,500 machine their response was: “I don’t know, I was told I needed it!”
The material contained in this article is in the nature of general comment only, and neither purports, nor is intended to be advice on any particular matter. Persons should not act or rely upon any information contained in or implied by this article without seeking appropriate professional advice which relates specifically to his/her particular circumstances. iMed Insurance expressly disclaim all and any liability to any person, whether a client of iMed Insurance or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this article.
iMed Insurance is a Corporate Authorised Representative of Insurance Advisernet Australia Pty Ltd.
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