What Is Underinsurance? What Happens if Your Business Property Is Underinsured?
You’ve probably heard of the term “underinsurance” before, but what does it actually mean? In short, underinsurance is when a business does not have enough insurance coverage to protect its assets in the event of a claim.
This can happen for a variety of reasons, but the most common cause of underinsurance is simply not knowing how much coverage your business needs. Many businesses choose their insurance limits based on what they can afford, rather than on a thorough analysis of their potential risks. As a result, they often find themselves underinsured when they need to make a claim.
While it may seem like a good idea to save money by skimping on your insurance coverage, the reality is that being underinsured can end up costing you a lot more in the long run. If your business is sued or needs to make a large insurance claim, you may be responsible for paying any damages that exceed your policy limits – and this could leave your business facing serious financial trouble (or even bankruptcy).
Let’s say, for example, your business is sued for $500,000 but your insurance policy only covers up to $250,000. You would be responsible for paying the remaining $250,000 out of pocket.
How to avoid the trap of being underinsured in Australia
To avoid being underinsured, it’s important to work with an experienced insurance broker who can help you assess your risks and choose the right coverage for your needs. Make sure you review your policy limits on a regular basis and increase them as your business grows. And remember, it’s always better to be safe than sorry – it’s not worth risking everything you’ve worked so hard to build just to save a few dollars on premiums.
Speak to Ansvar
Ansvar is a leading specialist provider of insurance and risk management solutions for the Care Services, Community Services (Not For Profits), Learning and Education Services, Faith Communities, Arts, Culture and Heritage and Commercial Property Owner sectors. We can help you enjoy peace of mind that your organisation is fully protected with adequate insurance and tailored risk solutions that have been designed specifically for your needs.
We’re here to help – for general enquiries, call 1300 650 540 today.