Insurance should be an important priority. The future stability of your business may depend on you getting the right cover and, as such, it is vital that you understand exactly what you need and how to get it.
However, it is sometimes difficult to navigate the forest of jargon that surrounds the insurance industry. This quick guide will help you decipher some of that jargon and get the cover you need.
Underinsurance is a significant problem. Policies will have a clause stating that, in the event of a claim on an under-insured business or property, the insurer will only pay out the same proportion of the loss as the policy bears to the total value of the property or business. For example, if you only insure 50% of the value of your premises, the insurer will only pay 50% of the value of any loss.
It is sometimes tempting to leave out certain information when applying for insurance, in order to keep your premiums down. This is called concealment, and is likely to render your policy void.
Many insurance policies will require the policy holder to pay the first part of a claim. This is known as an excess. Some insurers offer policy holders the opportunity to pay a voluntary excess in exchange for lower premiums.
Your insurer will set a ‘limit’ that will describe the maximum that they will pay out. The limit may refer to individual claims or to time periods; for example the insurer may set a maximum pay out per year.
Maximum Indemnity Period
If you are taking out business interruption insurance, the maximum indemnity period is particularly important. It describes the maximum period for which the insurer will cover loss of earnings. It is vital that you settle on a suitable period, as failure to do so can have catastrophic results in the event of an extended business interruption.
Negligence is an important concept in many types of business insurance – particularly professional and public indemnity. It is defined in law as a failure to do something “which a reasonable man guided by those considerations which ordinarily regulate the conduct of human affairs would do.”
This process involves the identification and mitigation of risks that may affect your business. Some insurers will expect you to carry out a minimum level of risk management. Regardless, it is an important part of business management, particularly if you are an employer.
A party making a claim against you. The insured is the second party and the insurer is the first.
Wear and Tear
In the event that you make a claim for damage to or loss of property, the insurer may make deductions from the payment on the basis of wear and tear. This accounts for any reduction in the value of the asset as a result of its use or simply its age.
This is a small selection of the most important jargon that you are likely to face when buying and claiming on your insurance. Don’t be reticent to seek advice if you don’t understand any part of your policy; it is vital to know the exact terms of the agreement between you and your insurer.
By Josh Hall for Simply Business
For more on business insurance click here