Its all over the news, a number of direct insurers have declined claims as people were operating businesses from their homes.
Given the fact that the number of people who are operating some kind of business from home has significantly incresed we thought it may be helpful if we outline some of the thinking underwriters and insurers have around this subject.
Caveat: always ask your specific underwriter or insurer or broker what their terms & conditions are on the subject before making any decision.
DISCLOSURE
You would be obliged in one way or another to tell your insurer if you start or intend to start to operate a business.
DEFINITION
In the current business environment, the distinction between home and business have become more blurred. Unless it isyour(i.e. the insured’s) business and it is primarily run from the home, most insurers do not treat this as “conducting business from home”.
For example, if you work from home a few days a week, or do incidental paperwork at home for a business that performs the majority of its activities elsewhere, then msot insurers do not consider this to be a business run from the home.
If, however, you are running a business from your home premises, then you need to disclose this, regardless of the size or nature of the business.
Commercial Property Insurance – what does it cover?
It is worth noting that Commercial Property insurance can be purchased for structures only and not land (i.e. if a building catches fire or suffers structural damage).
What it does cover though are any items on the property as well as liability for claims made against you.
What this means in essence is that you are indemnified from damages, whether profits have been made or not.
What is specifically covered varies slightly from insurer to insurer and area to area but generally includes the following:
Loss of rent should your offices become unusable through fire etc.;
Loss of profit while premises are being repaired;
Damage caused by faulty goods sold or held at your premises;
Cover against a range of incidents, including theft, vandalism, malicious damage and fire;
Insurance contracts take the form of indemnity insurance products.
What this implies is that the insurer only has to pay the amount you have specified in your policy and not a penny more.
This means it is worth checking what kinds of quantities each party considers reasonable for different scenarios.
A fairly standard list of insured events for commercial property insurance include:
Fire
Escape of molten material from its intended confines at things
Lightning
Explosion or implosion
Storm, wind and rain
Water damage caused by leaking from damaged pipes, water systems, tanks or drains, or by a damaged main near the building
10 Reasons To Use An Insurance Broker For Commercial Property Insurance
1. You will have someone to help you find the right policy.
2. They can explain the policy’s details to you in terms that are easier to understand.
3. They can explain important clauses of your policy and how they apply to your business specifically. Maybe there is something about your location, type of business or more information about any risk factors for theft, damage or lawsuits on which you need clarification?
4. If you do not have experience dealing with insurance companies already then a broker will know what company policies and procedures you should follow when submitting claims. A good broker will also have built up relationships with insurance companies so if one company refuses to cover an expense that another provides at no extra cost chances are the negotiator on case at the insurance brokerage firm will be able to find a solution for you – at no extra cost.
5. They are there when you have questions or concerns about your policy, whether it be midyear before renewal time or even in the aftermath of a claim. It is always reassuring to know that someone else is working on your behalf whenever you have issues with an insurance policy.
6. If you were to lose all control over your own company due to some unforeseen event such as death, disability or bankruptcy then an insurance broker will know who to get hold of and what paperwork will need to be done from the company’s end so that everything keeps running smoothly without any hiccups for clients and customers alike – again at no extra cost!
7. A broker will negotiate prices with the different insurance companies for you so that you can get some of the best possible rates available on the market!
8. If you are new to owning or operating a business, especially one that handles valuable goods or property such as commercial real estate, a good insurance broker may be able to steer you away from excessive policies that could cost your company more than it needs to spend on coverage and savings that can be used instead to further improve your business products or services. Similarly when starting up a new company an experienced broker will know immediately what type of policy would suit your specific needs and look into how much they are likely to cost you.
9. It will keep paperwork flowing properly and efficiently.
10. Being protected against problems that can eat away at your business profits is a good idea no matter what industry you are in; an insurance broker who knows their stuff will know exactly how to protect your company and provide policies that fit your specific needs so if the worst case scenario does occur then they will also be able to guide you through all the necessary paperwork involved with filing claims or processing payments from other companies for any covered losses.
The 10 reasons listed above are a few of just some examples why it makes sense to use an insurance broker when purchasing commercial property insurance, however these 10 in particular stand out as being especially important.
The Insured hired a contractor to perform works on one of their properties. The Insured received an invoice for $13,000 from the contractor. The following week the Insured received an email claiming to be the contractor, stating that their bank details had changed and provided the new details. The Insured subsequently paid the $13,000 into the ‘new’ bank account. A few days later the contractor followed up the Insured for payment for their works at which time it was identified that their emails had been compromised and the Insured had paid a fraudulent account.
Outcome
The Insured made a claim on their Cyber Policy and after conducting investigations, indemnity was granted under the optional Social Engineering Fraud cover. The Insured was reimbursed for the direct financial loss suffered as a result of the fraud.
The Insured’s emails were accessed by a hacker who posed as the Insured and sent multiple emails to the Insured’s bank instructing for funds to be transferred into the hackers bank account. When the Insured discovered that 3 unauthorised payments had been made totaling $3,000,000, they immediately contacted their bank to freeze the funds. The Insured was able to recover $2,800,000 of the unauthorised transactions.
Outcome
The Insured notified the insurer who appointed lawyers and an IT forensic consultant to assist the Insured in repairing the damage to their system which was caused by the hacker. As the Insured had the optional Social Engineering cover under their policy, they were reimbursed for the direct financial loss of the $200,000 uncovered fraudulent transfers as well as their forensic and legal costs.
Payment: $230,000
The Insurer then issued separate recovery proceedings against the fraudsters to recoup the amount of the loss along with the Insured’s deductible.
Following the sale of 2 properties, the Insured was required to make a payment of $400,000 to their property consultant. On the day the payment was due, the Insured received an email from the consultant advising their banking details had changed.
The Insured requested that this be sent to them in writing on the consultant’s letterhead which they received, including the signature of the director of the consultancy company. The Insured was later chased by the consultant for payment at which time it was discovered that the email and letter had been fraudulent. The Insured contacted their bank to stop the payment and were informed that the money had already been withdrawn and transferred overseas.
Outcome
The Insured made a claim on their Cyber policy which triggered the optional Social Engineering cover. DUAL appointed an IT forensic consultant who identified that the hacker had infiltrated the consultants system and intercepted correspondence between the Insured and the consultancy firm. The Insured was reimbursed for the outstanding funds (capped at the Social Engineering sub limit of $250,000).
