smallbusiness.co.uk: Helping your business think big

Read our guide on how to avoid playing with fire by getting the right insurance cover for your business.

Ronnie Park, managing director of conveyancer OneSearch Direct, realised how important it was to have an insurance policy after his premises caught fire. ‘It happened in the middle of night, and by the time we got there the whole place was ablaze. Fortunately we had a contingency plan and insurance cover. If we hadn’t, there’s no question that we would have lost the company.’

However, trying to get the money back from his insurance provider proved difficult. ‘It took 18 months to reach a settlement. I think the problem is that business disruption is not an easily measurable cost. It covered our loss of machinery, but the loss of profit caused by the damage was hard to calculate.’

Hard ball

Park found that his insurance company did everything it could to avoid paying. ‘They actually brought in an expert who claimed that we wouldn’t have made any profit during the period we were out of action. So we had to bring in our own expert to fight them. It took a long time, but we were eventually awarded £2 million.’

Stephen Bentley, owner of Granby Marketing Services, has a turnover of £5 million and says the key to having strong policies is using a firm that knows your business well.

‘I’ve been running the business for about ten years, and in that time I’ve had three different brokers. With each successive one we managed to bring down our premiums. We actually pay less now than when we started out.’

‘I think the problem is that once the insurance policies are written, they don’t get reassessed. Our original package was £55,000 and we changed brokers when they wanted to increase it by £15,000. At the moment we’re paying £50,000, but the main benefit of our current broker is that they act as a risk manager and help inform all our health and safety policies.’

Certain policies may be hard to access these days, as Joanne Davison, co-owner of freight company Davison European, found last year when seeking trade credit insurance. ‘I decided to get cover after we lost £160,000 due to bad debt in 2009. We were working with one big-name company that suddenly went into administration, which wiped 30 per cent off our ledger book and put us in a dreadful position.’

Davison says the terms offered by the majority of insurance providers for bad debt protection were too onerous: ‘They wanted us to put our house on the line and we weren’t prepared to do that.’ Eventually she found a company prepared to offer more favourable terms.

‘If we hadn’t, I would have had second thoughts about whether to continue with the business. We haven’t made a claim yet, but it’s such a relief to know that if one of our customers does falter, we’ve got the insurance to fall back on.’

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