Uncertain times leave small businesses underinsured

Business menThe decision to leave the European Union means that British businesses are facing an uncertain future. Doubtless there will be some ‘winners’ and some ‘losers’, but one thing we do know is that the drop in the value of sterling could leave businesses vulnerable to the risk of being underinsured.

With tricky times ahead it’s more important than ever to look after your bottom line, and that means making sure your business is adequately insured. A recent report by the Financial Conduct Authority identified ‘an alarming degree of under-insurance’ in the small business sector and estimated that 40% of SMEs didn’t have enough cover. Add-in the weakening pound and businesses relying on overseas goods or equipment could face a serious financial shortfall when it comes to making an insurance claim.

In response the British Insurance Brokers’ Association (BIBA) has produced a guide to help businesses make sure they have got the right amount of cover and to consider the risks posed by Brexit. It’s well-worth a read and is packed with useful tips including our following favourites:

Recovery Takes Time When reviewing your Business Interruption Insurance bear in mind that it’s likely to take a ‘minimum of 24 months for a business to fully recover its trading level and rebuild its customer base’. It’s especially important to check the indemnity period if you have bought an ‘off-the-shelf’ business insurance package (rather than bespoke cover) as you may be left financially exposed.

Definitions Can Vary Remember that ‘accountancy’ and ‘insurance’ definitions of ‘gross profit’ are likely to be different; so make sure you use the right one when reviewing business interruption cover.

Get Professional Help Specialist insurance brokers are well positioned to help assess indemnity levels and make sure you’ve got the right amount of cover for your business. As well as ensuring you’ve got the right amount of cover a broker can make sure that you’ve got the right type of cover. Taking Liability Insurance as an example, things quickly get complicated with a host of products aimed at a host of businesses, some of which are a legal requirement and some make smart business sense.

Calculating Buildings Costs Remember that buildings insurance is designed to cover the rebuild cost and not the current market value.

Safeguarding Against Disaster Sadly most businesses don’t make it to their fifth birthday and it’s important to know how you will react when the cards are against you. Planning for the worst (also known as business continuity planning) will allow you to react with a clear head and maximise your chances of getting your business back on its feet.

Risks Continually Change Emerging risks such as cyber threats mean it’s important to regularly review your insurance. Last year’s government backed Security Breaches Survey revealed that 69% of large organisations and 38% of small businesses had been attacked in the previous 12 months, and the problem looks set to get worse.

Echoing the FCA and BIBA findings Mike Cherry of the Federation of Small Businesses commented “It is vital small businesses aren’t left in the lurch when the worst happens. We would encourage all small firms to make sure their current insurance arrangements offer suitable protection, to mitigate the risks of business failure or constricted cash flow resulting from unexpected costs.”

To find out how Quoteline Direct can help ensure your business is completely covered visit our Business Insurance pages or Tel: 0161 874 8020 to speak with a member of our team.



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