Dear Aunty B,
We have a small business that was broken into. After paying ridiculously high premiums for years, we have been told that the insurance company would not cover us because our locks did not comply with their policies.
Can they do this? I feel like I have been robbed twice.
They can and they do. Yes, it’s frustrating. You pay your premiums and you sleep at night, thinking you are covered. But many policies get rejected because people have not read the fine print and complied with the policy.
There is a very interesting chapter in a book called Bullet Proof Your Business by Michael Featherstone. He prepared investigations for and against major insurance companies for 10 years and many of the investigations were on the assessments of claims made by suckers like you – people insured who assumed they were covered. He hastens to add that while he investigated complaints, he never sold insurance or was employed by an insurance company.
The first point he makes is to deal with a reputable insurance adviser, as the industry includes those brokers who ask you to sign and to leave it all to them. “This is not good enough. You have to check and double-check all the details.” He points out that many insurance claims are denied or substantially reduced because the claimants have not complied with the terms and conditions of the policy.
This caused him to think of his own insurance, which was costing $30,000 a year.
When he investigated his own circumstances he found he had been paying large premiums thinking the business was insured properly but would not have been covered if he had made a claim. Why?
With professional indemnity, public liability, business interruption and key man insurance, a substantial element of the terms and conditions is the accurate disclosure of the type of business undertaken and the turnover.
His original disclosure had been correct, Featherstone writes, but in six years the turnover had increased dramatically and the business had expanded into other types of activities. He told his broker, the policy went up – but he could sleep because he complied.
More pertinent to your case, he found he was not complying with building and contents insurance which required a much higher level of security. He immediately upgraded all his security including doors and window locks and commenced a risk register to record regular security checks.
DL, you want clients to read the fine print on the contracts you sign. You must do the same for your insurance. Most underinsured businesses that suffer a big loss never recover. If you have the wrong type of insurance or are underinsured, the pain is even greater – you thought you were protected and you were not.
So our thoughts are with you DL.
Your Aunty B.