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Business insurance is there to protect you. But insurance claims can sometimes be a headache, especially as you usually have other things to worry about. A rejected claim is an added stress you really don’t need.
Here, we look at three common questions asked by owners of small and medium-sized businesses regarding insurance claims:
Unsurprisingly, SMEs are most likely to complain about insurers when they fail to uphold a claim. But why would an insurer dispute a genuine claim? The reasons generally relate to the contract.
A very common dispute between insurers and small businesses occurs when the insurer maintains that damage to a property has occurred not because of the event claimed for, but due to a pre-existing condition of disrepair.
Let’s look at a real example from the Financial Ombudsman Service site. After severe weather and localised flooding, the owner of an office supplies business, Mr L, claimed that contents of his shop had been damaged by rainwater leaking through his roof. He sought reimbursement for contents damage and loss of trade.
Mr L’s insurer rejected the claim on the grounds that it was a latent defect in the roof, rather than bad weather, that was responsible for the damage – and Mr L had to fight hard to get the claim upheld.
Another area where this dispute commonly occurs – especially at this time of year – is when pipes bursts, and the insurer claims that the property was vacant and/or insufficiently heated.
Another much-disputed grey area is when the insurer argues that the SME has made a claim involving activities excluded by the contract.
The Financial Ombudsman Service cites the example of Mr G, the owner of a small groundworks business, who was sub-contracted to carry out a job at an RAF base.
Mr G claimed for substantial damages when he drilled into a fuel-line. But his insurer rejected the claim, as it considered the RAF base to be an ‘airport’, which was specifically excluded by the terms of the policy.
So how can SMEs avoid similar disputes with their insurers?
The first solution is to have the right contract to be begin with. This is best achieved by seeking the advice of a professional broker who knows the ins and outs of contracts, and can match the conditions of various policies with the specific needs of your business.
A broker service will also be able to help you in the event that you do need to make a claim – as they can act as an intermediary, working with both parties to find a reasonable solution.
The second way to avoid problems with claims is to minimise the necessity of having to make one in the first place.
Your insurance policy can help you here. Reading and understanding the conditions of your policy – with the help of a broker if necessary – can highlight the measures your SME can take in order to reduce common risks.
A good example is security. Many insurance policies state that premises need to have certain security features in order to deter thieves. For instance, your contract may specify types of locks, doors and windows that limit the chances of a break-in. By abiding by these conditions, you’ll minimise the chances of having to make a claim.
A broker can also help if you feel the conditions of a policy are too rigorous. SME insurance contracts typically include features of policies of both private individuals and larger businesses. A broker may be able to help you negotiate terms that are more suitable for a smaller company.
It’s impossible to eliminate risk entirely. But by doing everything in your power to reduce it – by using a broker service to make sure you have the right policy, and understanding the terms of your contract – you will reduce the chances of a painful claims process.
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