Many business owners make the mistake of assuming that their liability insurance policy renewal automatically happens once a year. Unfortunately, missing a policy renewal date generally leads to a gap in insurance coverage and when it comes to a liability policy, a gap in coverage can result in significant financial losses as a result of legal costs and law suits.
This is according to Simon Colman, Underwriting Executive at SHA Specialist Underwriters, who says that it is essential for all businesses to review and update their liability policies on an annual basis. “Liability policies are referred to as ‘long tail’ insurance as the liability claim often comes through many months or in some instances, years after the actual event happened, which can raise serious issues for the business owner if their policy has not been renewed.”
As an example, Colman explains that someone who injures themselves after falling down a flight of broken stairs has up to three years after the fall occurred to take legal action against the owner of the property where the event took place. “This means that the liability claim could very well only be reported to the insurance provider many months after the incident occurred. As a result, it is strongly advised that business owners speak to their brokers about their liability policies and make sure they diarise the expiry dates of these policies in order to avoid any gaps in the cover. If the policy is written on what is called a “Claims Made basis”, which most are these days, then it does not matter if the policy was active at the time of the incident if the policy is not active when the claim is first reported.”
He states that it is also important that the business description gets reviewed to make sure that the insurer is aware of all the activities that the business undertakes. “With the economy currently under strain, various business owners may consider diversifying their offerings in an effort to generate further revenue. These new activities will come with new risks and it is vital that the new activities are disclosed to the insurer. Failure to do so will undoubtedly result in a claim rejection in the event of a incident related to the new services arises.”
Many local businesses have also opted to take advantage of the weak local currency and have started to export products, says Colman. “As some countries are more litigious than others, the businesses owner has to ensure that their existing liability policy will respond to claims brought from foreign territories.”
He recommends that businesses employ the services of a reputable insurance broker who has a good understanding of the various types of liability insurance. “Not all risks are the same for every business and there are many types of liability policies available on the market. Given the increased frequency and severity of litigation in South Africa, it is also important that the policy states a limit of indemnity that is relevant and adequate for the business.”
The specialist insurance market tends to offer broader insurance than the traditional insurance market. Niche covers are generally more focused on specific risks and should be explored as alternatives to liability policies that may have been included with the property insurance covers, says Colman. “Again that’s why it is important to have a broker who can provide appropriate advice.”
Lastly he provides the below tips for business owners to make sure they go into the New Year with optimal liability insurance;
- Get a broker who properly understands liability insurance.
- Make sure you have an appointment with your insurance provider to discuss renewal of policies well before the expiry date.
- Make a list of all new activities, products, services and developments that have occurred in the business over the past year.
- Be sure to disclose any new business territories.
- Discuss any and every incident that has occurred and could possibly result in litigation or claims for damages with the insurance provider.
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