Late February saw Cyclone Marcia damage thousands of Queensland homes and businesses. Now the storm has passed, those affected have begun the process of launching insurance claims so they can start rebuilding their lives and businesses. The Insurance Council of Australia has stated that 11,250 insurance claims have already been made with the total cost of payments reaching $67 million and counting [Sky News Australia]. Unfortunately Cyclone Marcia is just one of many catastrophic natural disasters to occur in Australia in the last 5 years.
In 2011 Queensland floods affected over 5000 businesses, and the bush fires of 2012-2013 destroyed 33 properties in New South Wales and a further 170 in Tasmania. The cost to recover from a natural disaster is huge, with many relying on their insurance policy to cover the damages. However it is at this crucial time that many business owners discover they are underinsured, leaving them with crippling out of pocket costs.
Roy Morgan Research conducted a study after the 2011 floods in Queensland, finding that of the 88% of businesses affected by the flood with some type of insurance, only 34% of had Property Insurance and only 14% had Business Interruption Insurance. In the event of a natural disaster, property damage and the costs incurred as a result of business interruption are likely to have the biggest financial affect on the business. Under insurance is a trend that is all too common Australia-wide, with 80% of businesses thought to be under insured by at least 10% [Insurance Risk & Professional Report 2011]. It is essential to be adequately covered for these environmental risks, as 70% of under insured and uninsured small businesses affected by a major event such as earthquake, fire or storm will never recover [Insurance Council of Australia, 2014].
Some business owners choose to be under insured as they do not want to pay the extra premium for full coverage, however it is often more cost-effective in the long run to pay an increase in insurance than to rebuild a business in the event that disaster does strike. Other businesses find themselves under insured as their assets have not been properly valued for insurance purposes. Another issue is the hidden costs that are incurred after a loss that many business owners are unaware of, such as: access difficulties, lead times for demolition, legal and professional fees, site and zoning conditions and business interruption. Your Authorised Representative can offer advice on how to best deal with these issues and manage your risk portfolio to ensure you obtain appropriate.
Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.
The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.