Recent storms that damaged Australian properties highlighted the “low” proportion of businesses with adequate insurance protections in place, as well confusion over certain insurance definitions, according to the National Insurance Brokers Association.
The storm that raged across the east coast of Australia in recent days was declared a catastrophe by the Insurance Council of Australia (ICA), with estimated losses quickly reaching tens of millions of dollars across three states.
This is a timely reminder that knowing what to claim, and with what kind of insurance, could help a business survive against the elements.
Flood damage vs storm damage
It’s important to know what your insurer considers the difference between flood damage and storm damage, to get the most out of your claims.
According to the ICA, the most recent definition of a ‘flood’ is:
The covering of normally dry land by water that has escaped or been released from the normal confines of:
• any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or
• any reservoir, canal, or dam.
If the damage isn’t a result of a flood, then it is considered storm damage.
However, a spokesman for the ICA told ABC News that actions of the sea are a common exclusion in many insurance policies.
Three tips provided by the ICA to maximise insurance claims are:
• Contact your insurance company as soon as possible.
• Insurance companies should be contacted before any work to buildings is commenced to request for written permission, including emergency repairs.
• To prove damage was done to buildings and/or objects, take photos, videos, and samples of the damaged items to get claims processed as quickly as possible.
Business continuity insurance
As well as insuring against physical damage, another means for SMEs to protect themselves is through business continuity insurance, which can protect businesses if anything stops them trading.
Yet National Insurance Brokers Association CEO, Dallas Booth, told My Business that this type of insurance isn’t being considered enough by businesses.
“The number of businesses having [business continuity insurance] is quite low ... we think it’s around only 20 per cent,” said Mr Booth.
“That’s a real threat, because if people can’t operate their business for a day or a week or a month, that can have real implications for the viability for the success of the business and ultimately, it could threaten the overall viability.”
Business continuity insurance can also cover you when broader operations, outside your own business, are affected.
“[Business continuity insurance also covers you if] there’s been areas where there’s been a major event, and whole blocks of shops and businesses have been closed down for a period of time,” said Mr Booth.
“It could be something affecting somewhere nearby, where everything is closed down for a period of time.
“While you’re not trading, you still owe money to the bank, you still have to make payments to your finance companies, you still have to pay your staff ... and as the business owner, you have your own expenses that you need to cover, so your financial burden continues when you’re not trading.”
A major event like the June storms should cause business owners to think about insurance, Mr Booth said.
“[Business owners] should certainly be talking to their insurance broker to outline how they’ve been affected and to double-check what sort of cover is available.
“It’s also a good time for people who haven’t been affected by these storms to review their policy coverage and … get some advice.”