As the summer is fast approaching and small businesses getting ready for the busy season ahead, online small-business insurance provider BizCover is reminding small-business owners to not overlook a key risk: underinsurance.
“Underinsurance is more than just an industry buzzword,” Brad Miller, General Manager of BizCover, warned. “For many small-business owners, underinsurance could mean the difference between staying in business or being forced to close up shop.”
Defined by the Insurance Council of Australia as not having “enough insurance to cover the replacement value of the items you’re insuring”, underinsurance is common in Australia according to BizCover. However, many small businesses reportedly have no idea how devastating underinsurance can be. A 2022 survey of Australian small and medium businesses, conducted by insurer Vero, found that only 43 per cent of respondents thought they were completely covered, 51 per cent said they were mostly covered, while six per cent admitted they were only partially covered.
The same study also reported that 34 per cent of business owners who were either mostly or partially covered had no alternative plan if the worst were to happen to their business. Another 20 per cent said that a negative event would mean selling, shutting down or temporarily closing their business.
While underinsurance is a year-round issue for small businesses BizCover noted that it may be more pressing during the season rush given that summer trading is not business as usual for many businesses. For one, changes in how they operate from November to February may increase risks or create new ones.
“A classic example is a retail shop storing more stock in the lead up to Christmas,” Miller explained. “If a fire or storm damages your retail stock, you could be out of pocket replacing it without the right type of insurance. In this case reviewing or adding appropriate contents cover to a Business Insurance Pack.”
Despite underinsurance being widespread amongst Australia’s small businesses, correcting it can be easy according to BizCover. By thinking about their business such as how it operates, what activities or products it offers, and their industry, small-business owners can begin to decide what types of insurance may benefit their business or might be required for them to trade.
Small businesses are also reminded to check that other policies are still current. Public Liability insurance is typically required to lease commercial premises, but BizCover said that it’s not unheard of for business owners to accidentally let these policies lapse.
