Insurance is insurance, right?
BUSINESS TAX FACTSHEET
Insurance is insurance, right? Not really. Get insurance right and you're properly covered. Get it wrong and you may discover that your insurance barely covers you in the event of something unforeseen.
Choosing the right insurance policy to suit your specific circumstances and risk profile isn't easy, and most people underestimate the due diligence required to ensure that they are adequately covered – despite reading the product disclosure statements provided by insurers.
Depending on your business you may require a straightforward policy or something more complex, and that may mean combing through a number of providers to get what you need. We hear complaints all the time in the media about insurance, particularly when the expectation of the client wasn't the reality of their insurance coverage.
No policy is the same and talking to an insurance expert can make a huge difference to your choice of cover.
Whether you do your own research or use an insurance expert or broker to explore your needs thoroughly to match you with the right policy, giving full consideration to your options is important. You need to know what you should and can be covered for, as well as what a policy won't or can't cover.
When you are considering an insurance policy, there are a number of factors that must be considered that go beyond price alone.
It is natural for people to look hard at costs and ensure the insurance is affordable, however it is equally important to consider the total value of the policy, the business operations of the insurer, claims procedures and the exclusions that often accompany an insurance policy.
For example, the insurer you choose should evaluate your specific risk areas, be affordable and handle any claims are processed efficiently. There are three ways you can sort out your insurance needs:
- Go it alone and choose the provider and policy that you think is appropriate for your needs;
- Talk to a broker affiliated with a range of insurance providers and they can help you determine which of their products is suitable for your needs;
- Talk to an independent broker who is accredited with insurance companies but has access to a range of products across a broader range of providers.
If you have the experience or the confidence to choose your own policy and purchase it directly from an insurance provider, just bear in mind that while it may prove cheaper, you'll also need to keep reviewing the policy to ensure it is appropriate for your needs, that your insurer has the right coverage and be aware that the advice you receive about the policy is not necessarily suitable for your circumstances.
The alternative is to use a broker, who will have experts in specific types of insurance and know how respective insurers operate, their internal policies for claims, the manner in which they assess claims and risk.
The benefit of a broker is that you typically have someone who has the experience and knowledge of how insurance works and who can help match you to the right policy for your needs.
But is a broker a broker?
There are essentially two types of brokers, those that have affiliations and those that are independent.
Brokers with an affiliation to an insurance provider are often required to offer the products from that insurance group. This is not much different from operating directly with an insurance group.
An independent broker, however will be accredited with a number of insurance groups – the more the better – and so they will look for the most appropriate insurance policy to suit your individual needs.
A broker will look at a broader range of products and will advise you on the product that is the best fit – and potentially the best value.
An independent broker will also continuously review the habits of insurance groups and if their behaviour is undesirable, inefficient or inappropriate should advise you accordingly.
A good independent broker will ensure that you have the best product for your circumstances beyond the first year. In fact, they should be someone you are able to trust, speak with honestly and frankly to ensure your policy needs are met. While going through a broker may cost more, there are significant benefits to having advice.
Price is often the motivator behind the choice of a particular insurance product, however as mentioned earlier is not always the best rationale.
If you were to compare going direct versus going via a broker or independent broker, it is fairly typical that you'll find the cheapest price by going direct and making your own assessment of the products. It's the real price you need to consider.
The real price is the additional risk you take in not understanding your policy or not being appropriately covered. The time it takes to process a claim, the time and costs that may be incurred in managing a claim and your insurance cover are all considerations you should make.
At the other end of the spectrum, an insurance broker is often a little more expensive due to the time they invest in understanding insurance products they deal with, their educational standards together with providing an appropriate service that factors in your specific needs – rather than that of the insurer. Additionally, a good independent broker will often have a claim support service that ensures you get the best result from a claim without the hassle.
Insurance is an incredibly difficult area for many to navigate and sometimes requires specialist advice. We work with a number of insurance brokers, banks, and insurance matters and have gained experience as to how they operate and how to deal with them. It is certainly the case that no one broker insurance group is the same and we have taken the time to identify the different groups that offers value for money for the client.
Because we take a broader view of your business and how insurance will support your business in your time of need, we also look at other issues, such as business operations that hinge of key people or owners and how effectively these risks are managed.
Bates Cosgrave does earn a commission from the brokers we work with, which contributes towards the cost of maintaining a valued service to our clients, however we may at times rebate summons commission to our clients.
This depends on the work involved and the value of the commission. We continually assess the performance of insurance brokers to ensure they are in the best position to make sure our client needs are met. We will also work with brokers on behalf of our clients to get particular information such as financial or taxation details and will work with the implementation of appropriate agreement or structural advice as required.
If you would like more information about insurance, contact your Client Manager on 02 9957 4033 or contact us here
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Last updated November 2011. This factsheet is provided for information purposes only and is correct at the time of publishing. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.