COVID-19 forced my business to close. Do I still need insurance?

In the past few weeks, our brokers have been receiving enquires from clients regarding the need for insurance should their business temporarily close due to COVID-19. There are many factors to consider when deciding to cancel your insurance. The fact that you have simply closed the doors temporarily is no reason to cancel your insurance without careful consideration. The attraction to save a few dollars in the short term could lead to significant financial loss down the track should the unthinkable occur. The possible challenges and costs in seeking cover when you reopen should also be considered. There are many things to consider and we encourage you to contact your broker directly regarding your options.

Property Insurance

Many businesses will still own the contents, stock, plant, equipment and in some cases the building they occupy. In times of high unemployment, the risk of burglary and theft may increase, especially to premises that have become unoccupied. This could lead to anything from minor theft and damage claims right through to large-scale fires due to unattended electrical faults or water damage from burst pipes.

Unoccupancy

Many insurance policies will contain an unoccupancy clause meaning they can refuse a claim if you don’t notify them after 60 days of the premises being unoccupied. You must contact your broker to discuss options if this happens at your property. In this current economic climate, insurers are showing flexibility in this area but you must advise as soon as possible.

Liability Insurance

Liability claims can occur at any time irrespective of whether you are open or not. Generally, liability insurance policies may cover your legal liability to third parties out in public. The policy needs to be in place at the time the loss occurs and if a third party is using your products, or they are interacting with your services outside of business hours there can still be an incident that occurs that may lead to a claim. You may also have stock stored outside or a customer carpark and if someone enters your property and gets injured or suffers damage then you need a policy in place at the time of the event.

In addition, many businesses will have contractual obligations with their customers, suppliers and even landlords that require them to carry Public Liability insurance. Even though your business may be in hibernation there could still be matters or claims that may arise based on these contractual conditions.

Motor Vehicles

Are you considering locking your fleet of vehicles up in the warehouse and sending your staff home? Have you thought about what would happen if the warehouse is impacted by a fire or thieves gain access to your premises? In this scenario, the chances of a large-scale claim can increase and it’s important now more than ever to keep these vehicles insured.

Workers compensation

If you have recently ceased employing staff, your wage estimates may reduce significantly. Recently an iCare has announced that its customers can change their estimates mid-term and receive premium relief. If you are looking for an alternative solution, you can also consider freezing your monthly instalments. However, we recommend that you should keep the policy running until you know with more certainty as to when the business will be back trading. Contact your broker to discuss how we can process a mid-term adjustment.

Premium Funding

If your business is under serious financial stress, but you are confident of returning, we may be able to apply to your Premium Funding company for a freeze in payments. However, this may only be for 2 months due to the short nature of Premium Funding contracts. You would also be required to pay the full amount before the next renewal period.

Fees for cancelling insurance

When cancelling insurance and or starting a new insurance policy there are various fees applied. Therefore, cancelling your cover for 3 or 4 months and then wanting to take out a new policy in the future may end up costing you more in the long run. Based on the exposures expressed earlier, the risks of not having insurance far out weight the small refund in the premium you may receive for a short period without cover.

Summary

We know the temptation to seek a small refund or to stop the insurance “direct debit” coming from your account may seem like a quick money saver. However, it is now more important than ever to keep your insurance current for as long as possible. Our brokers are fully aware of the financial stress you will be facing and we are here to work with you to try and find ways to reduce the cost of your insurance without jeopardising your cover and exposing you and your business to an even greater financial burden. We want all our clients to survive COVID19 and make it out the other side. Please contact us today to discuss your situation.

Disclaimer: This is general advice only and may change depending on your circumstances.

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