Here's an all too common scenario. A business owner is asleep after a hard day's work and the phone rings; his business premises are on fire. He races across town and literally watches as his whole life's work goes up in smoke.
For many, the business is everything: their sole source of income; their only investment; their superannuation for the future...and the reason for the mortgage over the home.
With daylight and after the fire brigade have gone, a new phase begins - police, investigation and perhaps an insurance loss adjuster. Staff arrive at work worried about their jobs; anxious customers awaiting delivery of big orders hear the rumors of fire and try to make contact.
By this time the insurance broker has been contacted to see if the premium was paid. Did I get the bill? Have I paid it? Am I fully covered?
We know that 84% of small to medium enterprises (SME's) believe they are fully insured. But what's the reality? Research has found that there are three main areas of underinsurance that cause most grief.
The first is removal of debris. Building fires generate tonnes of debris and many people just don't realise the high cost of removal and dumping after a fire.
The second is property values. According to a leading Insurer 75% of businesses roll over their sums insured year after year. After three years 46% still have the san1e sums insured as they did three years before. However in that time building costs have gone up 20%.
But sky-high building costs aren't the worst issue. Consider the cost of machinery and plant increases and this one example, stainless steel goods - up 50% over the last 12 months alone. Clearly, any restaurant or anyone in the food industry that needs stainless steel fixtures and fittings will find that they may be grossly underinsured.
Perhaps the area that has the most underinsurance of all is business interruption. Research shows that only 31% of SME's have any form of Business Interruption cover and even those who do don't have enough. The bottom line is that in the main, businesses without a sensible level of business interruption insurance will not survive a serious insured event.
That's three strikes, all conspiring to get you out of business.
How would you fare?