A business rarely stays exactly the same for 12 months.
It may add a new service, employ another person, buy equipment or move into a larger premises. These are positive developments, but they can also change the risks the business faces.
Many business owners wait until renewal to tell their insurance broker about these changes. In some cases, that may be too late.
You should contact your broker when a material change occurs so they can consider whether the current insurance remains suitable.
Here are seven changes worth discussing.
1. You have started offering new products or services
A policy is generally arranged based on the activities disclosed to the insurer.
If the business begins performing additional work, the insurer may not have assessed or agreed to cover that activity.
For example, a landscaping business may add tree removal or excavation. A bookkeeper may begin providing broader business advice. A retailer may start importing or manufacturing its own products.
Even if the new service represents only a small part of the turnover, it may create a different risk.
Tell your broker before commencing the new activity where possible.
2. You have moved premises or opened another location
A change of address can affect several parts of an insurance program.
The new premises may have different construction, security, flood exposure, fire protection or surrounding businesses. The values of contents and stock may also change.
If the old address remains on the policy, property at the new location may not be correctly insured.
Your broker should also be told if the business starts storing stock or equipment at an additional warehouse, home address or third-party location.
3. You have employed more people
Additional employees can affect wages declarations, workers compensation arrangements, management liability risks and other policies.
The type of work performed by employees is also relevant. Office-based administrative staff can present a different exposure from employees working at customer sites, operating machinery or driving business vehicles.
If the business begins employing people in another state or territory, additional workers compensation requirements may apply.
4. You have started using subcontractors
Using subcontractors does not necessarily transfer all responsibility away from the business.
A client may still make a claim against the business that engaged or supervised the subcontractor. Some policies impose conditions relating to subcontractors, such as checking their licences or obtaining evidence of their insurance.
Tell your broker about:
- The work performed by subcontractors
- The estimated annual payments to them
- Whether they work under your direction
- Whether they carry their own insurance
- Any written agreements governing the arrangement
5. You have bought vehicles, machinery or equipment
New assets should be added to the relevant policy before they are used.
This may include:
- Cars and commercial vehicles
- Trailers
- Mobile plant
- Tools
- Machinery
- Computers
- Specialist equipment
Do not assume a newly purchased item is automatically covered.
Financed assets may also be subject to insurance requirements imposed by the lender. Details of any interested party may need to be recorded on the policy.
6. Your turnover, wages, stock or asset values have increased
Many insurance premiums and coverage limits are based on financial declarations.
If turnover or wages increase materially, the business may outgrow the figures used when the policy was arranged. Increased stock, equipment or replacement costs may also result in the existing sums insured becoming inadequate.
Underinsurance can have serious consequences. Some policies contain provisions that may reduce a claim if the declared value is lower than the value at risk.
Regularly reviewing business figures can reduce the likelihood of an unpleasant surprise.
7. You have signed a major contract or started working with a new type of client
Large customers often impose insurance requirements through their contracts.
These may include specific policy types, higher limits, principal’s indemnity clauses or obligations relating to subcontractors.
A contract can also expand the business’s responsibilities beyond its usual activities.
Insurance does not automatically cover every liability accepted under a contract. Before signing a significant agreement, consider obtaining both legal advice and insurance advice.
Other events worth mentioning
You should also contact your broker if:
- A director joins or leaves the business
- The ownership or legal entity changes
- The business begins importing or exporting
- Work starts in a new state or country
- The premises will be vacant
- Security or fire protection changes
- The business becomes aware of an incident that could lead to a claim
If you are uncertain whether a change is relevant, it is better to ask.
Do not wait for renewal
Renewal is an important opportunity to review the entire business, but it should not be the only time you speak with your broker.
A short conversation when something changes can help keep the insurance aligned with the way the business actually operates.
General Advice Warning
The information in this article is general in nature and does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate for your circumstances and review the relevant Product Disclosure Statement or policy documentation.