Are you covered? Hugh J Boswell dispels five common insurance myths.
1. I can drive any car on my private car insurance.
It used to be true that your comprehensive private car insurance would have covered you to drive a vehicle which doesn’t belong to you, providing it was insured elsewhere. Unfortunately, it is becoming more and more common for this not to be the case, at least without stipulations such as needing to notify your insurer first. Even when cover is provided, it will be restricted to third party cover rather than comprehensive, meaning any damage you do while driving will not be covered. We would recommend that if you are in any doubt, that you contact your insurance advisor for advice.
2. I don’t need to insure all of my business equipment, as I’ll never lose the whole lot.
If you have your equipment insured for £25,000, as you feel this is the most you would be likely to lose in a claim, but actually own £50,000 worth and expect insurers to fully compensate a £25,000 loss, unfortunately you may be mistaken.
In the event of a claim, your insurers will look at your sum insured in relation to the actual total value of equipment at risk. If these figures are different, they could seek to apply a condition called average. This means they’ll divide your total value at risk by the sum insured to get a percentage, which in this example would be £50,000/£25,000, giving 50%. This percentage is then applied to your sum insured, meaning in this case the most an insurer could pay is 50% of £25,000, so only £12,500. This principle can be applied to even the most modest of claims, leaving you out of pocket on every occasion.
We would recommend a thorough review of your sums insured with your insurance advisor to make sure they are adequate and correctly insured to fully compensate you in the event of a loss.
3. I’ll never need more than 12 months of Business Interruption cover.
A common flaw that we witness in prospective clients’ insurance programmes is around business interruption. It is quite common to think that in the event of a catastrophic event (flood, fire etc.), 12 months is long enough to return a business to the same position as before the loss occurred.
Whilst it is our fervent hope that this is correct, there are so many outside factors that can prevent a swift resumption of business as usual that it’s very often not the case. It’s impossible to list them all here, but they could include: planning permission, sourcing of replacement machinery, retention of key staff, and tendering and securing the services of an appropriate contractor to rebuild your premises. In addition, if your premises are leased, you will be reliant upon a landlord to replace the building. If you decide to relocate, it may be difficult to find a location that suits your requirements without the need for alteration. These eventualities can be discussed with your insurance advisor, who can go into it in greater depth with their knowledge of your specific business needs.
4. I don’t have to notify my insurers of every injury I’m made aware of by an employee or customer.
This is incorrect, as insurers prefer to be notified of any incident that could give rise to a claim, and can refuse to deal with a claim which is first notified months after the actual incident. Immediate notification allows insurers to make an early investigation of the circumstances, gather any evidence, and build a defence in anticipation of any potential claim being made. This gives them a significantly better chance of defending a claim that is made at a later date, whether by an employee or third party, which in turn means your insurance premiums are less likely to be increased. We recommend that you let your insurance advisor know when any incident occurs, so they can advise you on how best to handle it. They will also be able to work with you – if there are multiple incidents – to remedy this or find the best way to inform your insurer of these issues.
5. Work experience students are the responsibility of their school or college and are not technically employees.
This is also a myth; work experience students are considered your responsibility on the same basis as your own employees and are accorded the same rights. They can claim against you if they are injured whilst in your care and custody. If you regularly have work experience placements, please alert your insurance advisor, as your Employers’ Liability insurance will provide cover for them. Additionally, insurers may want to know if you have them on site and how many placements you provide in a year.
