Cutting back on your insurance could cost you your business

high-net-worth

March 8, 2013

Given the current economic state it is understandable that small and medium sized enterprises (SMEs) are cutting back on unnecessary costs. Unfortunately, what seems to be happening more and more often is that they are cutting back on insurance cover in order to save money, exposing themselves and their business to unforeseen and often escalating costs if a claim is made.

Research conducted by a leading insurer has revealed some surprising insights into what insurances SMEs are willing to go without with the view of saving money in the short term. Almost 30% of all UK small businesses said that they only purchase the minimum necessary insurance cover even when insurances required by law such as employers’ liability were involved. Also, amazingly only 21% have professional indemnity insurance which covers against harm caused to a client or other third party including property damage through negligence.

The study has also shown that a high percentage of UK SMEs are worried about threats to their business yet do not insure against them. The biggest uninsured concern was not being paid by clients (57%), 23% worry about being sued by a client, theft of stock or material closely followed at 20% and finally, damage caused to a business through civil unrest was close behind with 15% saying they were concerned. Even threats such as fire or loss of equipment and stock are not always protected against.

These clear gaps in essential cover could be avoided if SMEs work with their broker in order to manage risks more effectively and efficiently, currently only 11% do this. It is important that business owners recognise the risks their business faces in order to fully understand the types and levels of insurance cover that they need. If the correct risks are managed and insured against, unexpected costs can be avoided and money could be saved in the long term.

Cutting back on your insurance could cost you your business.