Advice vs Price: It’s all in the wording

By Chris Dougherty, General Manager, Westlawn Insurance
14 April 2014

This month in our series on Advice vs Price , we examine the importance of understanding the policy wordings contained within individual business insurance policies as even small differences in policy wordings between policies could have a significant impact when it comes time to make a claim.

Business insurance policies are long, complex contracts. Policy documents will include a multitude of different conditions and exclusions on what is covered, and what is not covered, under your policy. Each insurer will use their own words, phrases, and sentences in their policy documents. And it’s when it comes time to make a claim that these policy wordings become vitally important.

How your policy is worded could mean the difference between your claim being paid or not. Or, it could determine how much you are entitled to claim.

To know exactly how you are protected for the insurance cover you pay for means understanding the policy wordings of each section of your policy document. But it seems that many small business owners do not properly scrutinise the policy wordings of their policy documents.

Only 24% of business owners read their policy 

Several years ago, a survey of 1,006 Australian small businesses with less than 20 full-time employees was conducted. Surprisingly, the Policy Wording Readership survey revealed that:

    • 24% always read the policy document
    • 11% never read the policy document
    • 26% only skimmed the policy document
    • 10% rarely read the policy document, and
    • 28% occasionally read the policy document.

These survey results suggest that up to 75% of small business owners have little or no understanding of what they are actually covered for under their business insurance policies.

Why it’s not all about price

While for many small business owners, price may be an important consideration when choosing business insurance, selecting the right policy goes beyond simply choosing the cheapest.

To make an informed decision requires an understanding of the different policy wordings for comparable policies and determining which is most suitable for the needs of the business.

For example, does the policy cover the costs of removal of debris from your property? And if so, up to how much? Is the amount in addition to the sum insured, or included within the sum insured?

Does your policy provide for the costs of preparing your claim?

Are any extra costs of reinstatement payable in addition to the sum insured?

For claims of property damage, is it up to you to prove the cause of the loss?

This information will all be contained in the complex wording of the policy document.

The value of advice

With the policy wordings of business insurance policies crucial, particularly come claim time, the value of seeking advice from an Insurance Broker is clear.

An Insurance Broker understands the various policy wordings of different insurers and can effectively compare and evaluate the different policies to ensure your business receives the most appropriate cover for your needs.

While the benefits may not always be immediately apparent, you will be glad you chose advice over price when it comes time to make that claim.

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