The ABCs of Insurance – Guild Insurance

Did you know that being underinsured can lead to a range of problems that may affect your ability to fully recover after an unexpected loss? Underinsurance is when you have insured your assets for much less than the actual cost of replacing them.

It’s easy to overlook important details like rebuilding replacement costs, indemnity periods, or the value of your contents, which could lead to underinsurance.

To ensure you safeguard your business against this risk, we’ve put together a checklist of important considerations:

1. Know the total value of your assets, and get appropriate cover

• Building coverage – ensure that your building is insured for its actual replacement cost, which is the cost needed to rebuild it from the ground up in the event of a total loss. This is different from the building’s market value. Market value includes the land and external factors; replacement cost is the actual cost to replace the structure, including materials and labour.
• Internal fit-out replacement – make sure you consider the internal fit-out and confirm that your policy limits reflect the full replacement cost, even if the landlord initially covered some of the fit-out expenses. Keep in mind that the landlord may not contribute to the replacement in the event of a loss.
• Business property and equipment – it’s important to perform regular reviews of all business equipment and any other property that could be damaged or lost. This is where an asset register comes in handy.
• Speak to a professional – consider using appraisers and valuers to accurately determine the value of your assets.
• Business interruption cover – this covers loss of income if your business is unable to operate due to an insured event. Consider the typical time it’d take to rebuild or repair your business and resume full operation.

  ➤ We recommend a minimum of 18 months, with many larger centres needing at least 24 months.

2. Know your responsibilities and requirements as stated in your lease agreement

• Contractual responsibilities – ensure you read your lease thoroughly, which should clearly state your insurance responsibilities and the landlord’s responsibilities. If you’re unsure, please speak to the landlord or property manager.
• Record keeping and timely reporting – keep a record of all service agreements, repairs, or issues related to the property in case you need it for reference.
• Liability coverage – if the landlord should have their own insurance for the building and any internal fit-outs, it’s essential to have your own liability insurance for your childcare business.

3. Review your policy exclusions

• It’s important that you understand what is and isn’t covered in your business insurance pack. Your account manager will help to explain the exclusions and what they mean for your centre’s operations.

4. Be aware of underinsurance penalties in your policy wording

• It’s important to prevent underinsurance as it could result in a reduced payout when making a claim. See below for an example of an underinsurance clause in the policy wording:

Example: under-insurance on Buildings

Therefore, if a $100,000 loss occurs, you would pay $90,000 (less any Policy Excess), calculated as:
($144,000 ÷ $160,000) × $100,000 = $90,000

5. Opt for Reinstatement Plus cover on your early learning policy for added peace of mind

• Despite best intentions and following the guidelines above, people may still find themselves underinsured for a number of reasons.
  ➤ Our Reinstatement Plus cover provides you with a 50% safety net on top of your insured building value, fit-out and contents in the event of a total loss, and ensures that the underinsurance clause will not penalise your claims payout.
• ➤ Click here for a full explanation of this cover and how we establish your safety net sums insured.
• ➤ Please speak with your Account Manager to confirm if you’ve signed up for this benefit.
  

If you’re not a Guild Insurance customer and would like to speak to an Account Manager, follow this link to our enquiry form. You can also contact us on 1800 810 213, and a member of our friendly team will be happy to assist.