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Everyday commercial insurance myths

Tuesday, April 24, 2012

In today’s increasingly competitive local and global environment, obtaining financial security via customised insurance is key to the growth of a business. Understanding the fundamentals and more importantly, the myths, relating to insurance policies is therefore crucial in order to secure financial peace of mind in the unpredictable event of damage or loss. 

According to Lisa Teixeira, Chief Operations Officer at CIB Insurance Administrators, it is imperative for business owners to be well-informed when committing to insurance policies, especially understanding common myths to ensure effective risk management.

“There are still numerous fundamental misunderstandings relating to insurance which can have an impact on the running of a successful business. The onus is ultimately on business owners to ensure that they are fully aware of all clauses listed in their polices and the implications thereof. If unsure, business owners should consult their broker on the correct course of action to safeguard their business,” says Teixeira.

According to Teixeira, the most common insurance myths that business owners need to be aware of are:

  • Insurance is only for cash-flush or wealthy businesses

This is not necessarily true as wealthy business owners are often able to replace stolen or damaged property more quickly if a loss occurs. It is often the business owner who doesn’t have much disposable income that requires insurance the most - as they cannot afford to fix a damaged car or repair a shop roof that has blown off if accidents occur.

  • Inflating an insurance claim is not deemed to be fraudulent

Claiming for items which were not in fact lost or damaged, or claiming an inflated amount is dishonest and fraudulent. The concept of insurance is to place the insured back into the same financial position that he was in before the loss occurred, not a better position. For example, if a basic, entry level type laptop is stolen and a top of the range laptop is then claimed for, the insured will then be in a better position than before the loss.

  • Anyone can drive an insured vehicle

This depends on the type of policy a business has in place. Only the dedicated driver listed on a named driver policy by a company can drive the insured vehicle. If however, an open policy is in place, anyone within the business can drive the vehicle. This will usually come at more of a cost and could include an additional excess.

  • If I insure my vehicle for a certain amount, this is what I will be paid in the event of a claim

In the event of a total loss, the policy will pay the reasonable market or the retail value of the vehicle (depending on the policy) at the time of the loss. The sum insured would be the maximum amount payable. The onus rests on the insured, however, to ensure that the sum insured is regularly updated to reflect the correct market/ retail value.

  • Acts of God are not insured

“Acts of God” are events which take place due to natural causes such as storms, flooding, lightning and wildfire and these are indeed insurable.

Teixeira advises that, at all times, business owners read insurance policies and contracts carefully, and consult a broker, to ensure that they are comprehensively covered.

by FA News