F E AT U R E
Five things to remember before taking out a business insurance pack Aon The term “business insurance” may be familiar. It can either refer to any policy that covers a business, or, more commonly, it refers to a package that covers businesses and their assets against events like fires, storms and theft. This second policy is called a Business Insurance Pack, and has the following five important elements to ensure there are no gaps in cover.
1
A Packaged Insurance Policy
A Business Insurance Pack is a packaged policy that generally has various sections to cover different business needs. It is important to understand these sections to ensure a business has the right cover. For example, a policy may cover contents, but unless there is also cover for theft, the contents will not be covered if they are stolen from business premises. It is therefore important not to assume what the policy includes. More information can be found by scanning the QR code at the end of this article.
2
New Replacement Value
A Business Insurance Pack requires a nominated sum insured, which is the amount for which assets will be covered. This can also be called a limit of liability, and may need to reflect new replacement value. This means the sum insured must equal the cost to replace all business contents with brand new items that have a similar function, output and construction to those damaged or lost, or to rebuild a building from scratch. Failure to nominate the correct sum may mean the business is underinsured in the event of a claim.
It is a misconception that underinsurance only occurs during a total loss claim, like when a building burns down 24 otaus.com.au
3
Underinsurance
Underinsurance occurs when assets are covered for less than the amount required to replace them. If something happens to equipment or buildings, and the business insurance policy does not cover the full cost to repair or replace them, there may be out-of-pocket expenses. It is a misconception that underinsurance only occurs during a total loss claim, like when a building burns down. For example, if some equipment is destroyed in a storm, but the business is underinsured, the replacement cover may be reduced. To prevent underinsurance, Aon recommends an insurance valuation of assets. Unlike a bank valuation, an insurance valuation considers matters like property access, escalating costs in the event of a natural disaster, and the products from which a building is constructed (like asbestos, which may cost extra to remove).
4
Business Interruption
A key feature of a Business Insurance Pack is covering lost revenue in the time it takes to repair or replace assets after
