Customer Information Guide to Small Medium Enterprise Insurance Buying a Business Policy is nothing like buying a Domestic policy:-
DOMESTIC: When you purchase a Domestic BUSINESS: When you purchase a Commercial or policy such as a Home it already includes most Business policy you must purchase each section as sections, such as:required so you must be attentive to your needs. Please Fire & Perils, Burglary, Glass breakage, Fusion, refer to the back page for summary of each section of Liability, Money, Spoilage etc., interest. Updated 30-07-05 The following are CRITICAL POLICY ISSUES:
LEGAL ENTITY The correct LEGAL entity is vital otherwise you may have exposures under the policy divisions.
USE/OPERATIONS The insurer offers cover based on the "Common Knowledge" of the risk. If there non standard hazard/s not disclosed it can affect claims.
POLICY DIVISIONS We define this into 2 areas. Part a] = Your Property Part b] = Your Liability to others. LEVEL OF COVER Can be broken into 3 levels of cover:GOLD, SILVER and BRONZE.
In many cases you can select the level of cover for a] Your Property and b] Your Liability to others.
"Indemnity" operates to place the insured in the same financial position after a loss as that enjoyed immediately prior to a loss, after allowing for "Wear and Tear" or Financial depreciation. Samples of sections applicable:-
Burglary, Machinery Disability, Property.
Liability, Breakdown, Fidelity,
Money, Fusion, General
"Agreed Value" means a fixed value for the insured period (usually only for Car Insurance). "Replacement Value" More easily understood as "Full Value". This means you must insure for the "New NOT “Old" value. If you fail to comply the insurer has the right to proportionately underpay claims.
SECTIONS OFCOVER We have listed the basic (most common) on the reverse. We also have a 1 page Product Directory that offers a listing of many more policies.
If you under-insure for this section it is known as "Average" or "CoInsurance". This is further explained on the reverse of all insurance
Samples of sections applicable:-
ITEM INSURED Clarify the item to be insured falls within the correct section of cover. DO NOT ASSUME extras or accessories are covered. Tell us what they are and we can check.
CLAIMS It must be sudden & unforeseen. Once the "cause" not the damage has been determined we can establish what section of the policy is applicable. Phone us immediately.
INDEMNITY TYPE This means the "Basis of Settlement". There are 3 types:Market, Agreed and Replacement. "Market Value" is the most common. It is also known as "current value" which is the principle of "Indemnity" (see next definition of “Indemnity”).
Fire & Perils on Buildings and Contents, Loss of Profits, Glass, Electronic Equipment, ISR (Industrial Special Risks).
Note the rate for Fire contracts is very low, average is around $3.00 per $1,000 so this allows you to insure for the FULL Value at a reasonable cost. We recommend you add an extra 15% for inflation. The extra value can also be used for extra costs such as removal of Debris, storage and extra rental costs etc.,
.... Good, Bad, Right or Wrong .... .... these are the rules which you need to be aware of otherwise you will suffer undue losses. RISK MANAGEMENT 4 points 1.IDENTIFY KEY ASSETS TO PROTECT Static Assets; items, people & activities Mobile Assets; items, people & activities Consequential Loss of Income/Costs Liabilities from the above Assets 2. IDENTIFY What do you do (anything out of the Normal) What can go wrong – whilst allowing for present and future exposures What is it going to cost – Insurance versus What can you do about it. 3. Cross reference these issues against your current covers 4. Now talk to us, Your Professional Broker!
Examples of Underinsurance:Example 1] You buy a new machine for $5,000 and within Nine (09) Months the NEW replacement cost is $7,500 (50% increase) in this case you are unable to replace the machine based on current value insured. Example 2] You buy a printing shop with depreciated plant at $20,000 - The plant is 10 years old. To replace with import costs; dollar fluctuations it may cost $60,000? How much do you insure for? Answer: $60,000 You must insure for the FULL value, not just the purchase price. This is
good advice today - without a broker who will advise you tomorrow
We are a Registered Broker, Est 1978). Members of NIBA (National Insurance Brokers Assoc.,) You will discover we offer many extra benefits you will not get by dealing direct with an insurer. We offer Professional advice on these matters to minimise the Risk and "Protect your Assets".
The information is offered as a general guide to clients of Central Insurance Brokers. This guide is by no means conclusive. Please refer to the next Page for Guidelines of Sections of a SME Policy
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CENTRAL INSURANCE BROKERS SUMMARY OF SECTIONS FOR SMALL MEDIUM ENTERPRISE As at: 24/09/10 FIRE AND EXTRANEOUS PERILS Extraneous Perils includes such things as Malicious Damage, Storm and Tempest, Rainwater, Water Leakage, Explosion, Impact from Vehicles/Animals/Aircraft, Riots and Strikes, Earthquake and other as per policy. 1] BUILDINGS: (Average rate $3.00 per $1,000) (Min Prem $250) Replacement costs of the building including extra costs for building laws. Options to be considered are: a) Loss of Gross Rent and outgoings b) Removal of Debris. 2] CONTENTS: (Average rate is $4.00 per $1,000) (Min Prem $250) Replacement costs, allowing for inflation, shipment, new model/s etc., as well as other items which need to be considered:[ ] Stock/Work in Progress/Customers Goods, [ ] Plant & Equipment Fixtures and Fittings, [ ] and all other contents of Business, [ ] Costs for re-writing of records, [ ] Costs for Removal of Debris You must allow for Replacement Value of ALL Contents of your Business. The rates are generally nominal so if in doubt over insure to Allow for Fluctuating Asset movements (say 10% higher), extra items as listed Also view SME basic above. cover checklist If you have a fluctuating stock levels ask for a Stock declaration clause (You confirm your stock value each month/quarter (as agreed) and adjust premium by renewal declaration). ACCIDENTAL DAMAGE Average cost $50 for $10,000 (Min Prem $250) Most OFFICE Policies automatically include this cover and some business policies allow this cover as an extra. There is always an excess of around $250 (to avoid minor claims). This is MOST DESIRABLE to cover those GAP claims, where the loss is not otherwise included. CONSEQUENTIAL LOSS OF INCOME (Average rate $3.00 per $1,000) (Min Prem $250) Resulting from an interruption to your business which is 1st defined under the Fire and Perils section. This section is subject to "average" so you must declare the annual Gross or Net Profit, as agreed to. You can specify expenses not required to reduce the sum insured. Also consider accountants fees to reconcile plus other extra costs which arise from interruptions. Must declare Gross not Net Profit, however you can nominate certain expenses not required to reduce sum insured. Target clients are those dependant on passing trade (retail) or dependant on key machinery which his not easily replaced) At least take ICOW (Increased costs of working, to cover the temporary extra costs of alternative premises or extra staff. VERY VALUABLE- average cost say $50,000 = $125) BURGLARY . (Min prem $250) Resulting from Violent / forcible entry into Building. (Theft or shop-lifting is not standard cover) The insured nominates a sum to be covered for various sections Tobacco/Liquor products (average rate $120 per $1,000) Stock/Customers Goods (average rate $40 per $1,000) All other (average rate $ 30 per $1,000) DO NOT have to insure for FULL Value so consider a "Smash and Grab" limit and improve your security. Does not cover cash/ negotiables such as lotto or scratchies MONEY - Indemnity basis (Average cost $40 per $1,000) (Min Prem $250) Business hours, in transit and at home, option for cash in a safe or at the bank (similar rate) The policy usually includes around $250 for money on the premises outside business hours and if a higher limit is required an extra premium is charged. Money includes negotiable instruments (i.e cheques, stamps, money orders, vouchers, tickets and scratchies) No cover past the close of the next banking day. This condition obligates regular banking to avoid building up of cash which becomes a target for Burglars and/or Fidelity claims. GLASS – (Average cost $300 to $500) Accidental damage to glass (the glass must be cracked through the entire thickness). The insured must nominate if cover is for INTERNAL or EXTERNAL FIXED glass or for both. The policy includes around $500 for extras such as signwriting, temporary shuttering etc., PUBLIC LIABILITY – Office risks from Retail risks from Trades Industry from
Min premium $600 $600 for 2 people + $50 per person (turnover not critical as there is no product exposure however there is a “PI” Professional Indemnity exposure which is another policy) $750 for 2 people + $50 per person or nature of Product and turnover $700 for 2 people + $100 per person or nature of the Trade / Product and Turnover
This cover claims for 3rd Party Bodily injury and/or property damage caused by acts of negligence &/or accidents in connection with your known occupation. There are many extensions/variations, far too many to list so please ensure that you give a full description of your activities at your place of work and away so that recommendations may be offered. Statutory LAWS are very broad - you will have more responsibility than 1st thought. It is also critical to clarify the inclusion of:
Products (it means more than you think) generally it is anything you service, test or install, once it leaves your possession. "CCC" Goods in Custody (it means more than you think) Page 2 of 3
Extension/s to the Policy SPECIFIC to your Trade or Industry
Minimum Premium based on small minimum business. As the risk increases in staff and/or turnover the premium will also increase but only by a small portion. The bulk of the cost is in the initial risk itself. If you expect the insurer to cover you against sudden and unforeseen events you must make every effort to inform them of all your activities i.e., If you operate a 2nd business or vary your existing activities you WILL NOT be covered without prior consent. MACHINERY BREAKDOWN (Average Offices $450 Shops $650) (Min Prem $450) Covering above-ground Mechanical or Electrical driven plant against breakdown including sudden and unforeseen events. Some insurers offer replacement and others depreciate due to age. Note that there is no cover against events normally covered under other policies such as Fire and Perils and Burglary as you are expected to activate these covers. FUSION - Restricted form of cover. Only covers the MOTOR (not assoc parts/pipes) resulting from the flow of electrical current. Depreciation applies in all cases. Average Prem half of M/Bkd SPOILAGE (Rate approx 10% of Sum Insured). (Min Prem $200) Sub Section of Machinery Breakdown or fusion policy (ie., can not be purchased separately) Covers chilled foods only as a result of mechanical failure including sudden and unforeseen events. This may include a power failure but not a pre announced denial of services. ELECTRONIC EQUIPMENT (Min Prem $450) This is similar to Machinery Breakdown but for Electronic equipment. The cover is Accidental Loss/Damage Damage, and Burglary. Option for Transit. Breakdown cover may be conditional to a maintenance agreement. GENERAL PROPERTY (Rate see options) (Min Prem $400) This is ideal for a sub-contractor, mobile operator or when equipment is moved around anywhere in the State or Country as required. There are two types of cover available 1. Specified events; Fire & Perils, Damage resulting from collision or overturning of the conveying vehicle or Burglary from a locked vehicle or permanent sited building. (approx rate $35.00 per $1,000) 2. “Multi Risks” all the above plus broader Accidental Damage, excluding electrical breakdown (approx rate $65.00 per $1,000) LEGALEXPENSE (Min Prem $850) To cover the legal expenses of Litigation for Business dealings, options to include Cars and Taxation. MARINE CARGO/GOODS IN TRANSIT To cover goods when being shipped by Road, Rail, Sea or Air. There are several levels of cover to be considered. DISABILITY (Average rates – too many, according to occupation) (Min Prem $550) Replaces income of the insured (usually only 85%) when unable to work due to an Accident or Illness. Cover available for 1. Accident (weekly benefit) for an external Injury, usually paid for 2 years from Disablement. 2. Capital (lump sum) paid at the end of the weekly benefit period if still disabled. The amount paid is proportionate to the severity of the injury. 3. Illness (weekly benefit) for an internal injury, usually paid for 2 years from Disablement. The cover includes Personal Accident (external injury), Personal Illness (internal injury) or Capital (lump sum) benefits. The cover can be 24 hours or restricted to outside working hours as required. The benefit period is usually 104 weeks from disablement. Note: 1. Partial Disablement will result in reduced Indemnity 2. No Medical costs are include so review your Private health Insurance 3. Indemnity provisions are usually restricted to 85% of your PERSONAL taxable Income WORKERS COMPENSATION (Average rates – too many, according to Industry) (Min Prem $400) Compulsory, by law for the employer's STRICT Liability to all workers, as defined (this can include subbies so please clarify with us) for work related activities. If the insured is a "Pty Ltd" Co all WORKING Directors must be named or you can “Opt Out” of cover. If the insured is a sole proprietor/partnership you must name working family members living at home (note in this instance the employer is not covered). INDUSTRIAL SPECIAL RISKS - This is a special policy only available for large sums insured, usually a minimum of $3,000,000 The type of cover is "Material Damage" and items covered are referred to as ASSETS; Property, Contents, Loss of Profits etc., Within the policy the insured may select sub-limits for various benefits such as Accidental Damage, Glass, Money and various other options that would normally be available under a Business Package.
ADDITIONAL INFORMATION AVAILABLE PRODUCT DIRECTORY = 1 Page Listing of All Products SME BASIC CHECKLIST = 1 Page Basic Checklist of covers and costs OCCUPIATION RISK INDEX = 1 Page Checklist of Risks appropriate to your Occupation PRODUCT BROCHURE =multi pages on each Individual Product WWW.CENTRALINS.COM.AU Page 3 of 3
Introduction to Business Insurance for SME