Managing risk is an important part of prudently operating a
business. An effective risk management system will enable the
business to identify, assess, monitor and manage risks.
Some risks can be managed by having in place appropriate
insurance, although this is by no means the only way of managing
risk. Not all risks can be adequately insured against at a price
that is commercially acceptable.
Nevertheless, insurance is an important part of a well thought
out risk strategy. Additionally, having appropriate risk management
strategies in place may reduce the amount of some insurance
Here are 10 tips worth considering when assessing the adequacy
of the business insurance in place:
DO AN AUDIT OF YOUR BUSINESS AND CONSIDER WHETHER YOU NEED THE
Goods in transit;
Loss of income or business interruption;
Loss of rent (tenant default);
Theft and employee dishonesty;
Director and officers; and
Life insurance (for the business owner).
CONSULT WITH A REPUTABLE INSURANCE BROKER, PREFERABLY ONE WITH
EXPERIENCE IN THE INDUSTRY IN WHICH THE BUSINESS OPERATES
Insurance is a complex issue and it is important to obtain
proper advice about what cover is provided and what is
PERIODICALLY REVIEW INSURANCE ARRANGEMENTS TO MAKE SURE THEY
ARE UP TO DATE
Businesses often don't realise they are under insured until
there is an adverse event.
MAKE SURE YOUR BUILDING AND CONTENTS ARE VALUED AND INSURED FOR
THEIR REPLACEMENT COST
The depreciated value of the building and contents contained in
the financial statements for the business will not reflect the
actual replacement cost.
MAKE SURE YOU UNDERSTAND THE EXCLUSIONS AND LIMITATION CLAUSES
IN ANY INSURANCE POLICIES HELD BY THE BUSINESS
Policies often have exclusion clauses which a business owner may
not expect, such as exclusions about loss of cash, losses resulting
from employee dishonesty and losses relating to computer equipment
failures. It may be worthwhile paying a premium to have extra cover
included in the policy.
ENSURE YOU UNDERSTAND WHAT IS COVERED BY YOUR BUSINESS
It is generally designed to cover the loss of income incurred if
normal business operations are disrupted by damage to the property.
If your business location is critical to your ability to produce
income (such as for a retailer or manufacturer), then you will
definitely want to have business interruption insurance in
Also consider whether your business interruption policy needs to
cover more than just the destruction of the business premises. For
example, interruption of electrical, water or telecommunications
services to the building could cause a significant loss of income
without involving any destruction of the property and this may not
be covered by a standard policy.
CHECK WHAT WAITING PERIODS APPLY TO BUSINESS INTERRUPTION
You should consider whether it would be better to have a
deductible rather than a waiting period. This will depend on the
nature of the business. It's also important to consider how
long the insurance lasts after a catastrophic event.
Depending on the nature of the business, the income stream may
be disrupted for a considerable period after the event.
CHECK WHETHER THE BUSINESS INTERRUPTION POLICY COVERS
ADDITIONAL EXPENSES INCURRED, OVER AND ABOVE THE LOSS OF
If the premises are destroyed, then the business will have the
expense of renting substitute premises, buying or renting all of
the computer and business equipment it requires, installing
telephone lines and replacing stationery. Not all business
interruption policies will cover those expenses.
STORE ACCOUNTING AND OTHER BUSINESS RECORDS OFFSITE AND ENSURE
THEY ARE UP TO DATE
If you need to make a claim following a catastrophic event at
the business premises, then you will need access to those business
records to complete the claim.
Having proper records of equipment, inventories and other
essential items for the operation of the business can mean the
business is up and running again quickly, and the insurance claim
is processed more expeditiously.
FAMILIARISE YOURSELF WITH THE PROVISIONS ABOUT THE TIMING OF
ANY PAYOUTS ON THE BUSINESS INTERRUPTION POLICY
If a catastrophic event occurs, then the business is probably
going to need to access the insurance monies quickly. Some
insurance policies have a schedule of payouts or set
It is important to check whether such limitations are included
in the policy and what impact this might have if a claim needs to
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
This article examines common coverage issues and considerations for granting indemnity for criminal fines and penalties.
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