15/04/2015

By Kelly Ogley, Operations Director at Swinton Insurance

Recent research from Datamonitor found that more than half of SMEs choose not to purchase their insurance from a broker.

The study suggests there has been an increase in the number of microenterprises choosing to buy their insurance online.

Both of these points are a cause for concern. Purchasing insurance without first consulting a professional advisor could lead to business owners buying a policy they do not fully understand, or that might not provide the cover they need.

Small firms may choose to shop online because they believe that it will keep costs down, but this can be a short term view and a lack of suitable cover may cost them more in the long-run.

SMEs, and start-ups in particular, can often overlook the importance of having the right level of insurance and the possible consequences of having insufficient cover.

The most important step is to shop around properly. Some insurance providers are not listed on price comparison websites or their policies are not available via the internet, meaning that customers are not always aware of all the options available for their business.

Thoroughly researching all different options available, or contacting a broker or insurer directly, will help small business owners to get an insurance policy which is right for them.

Speaking to a broker will also allow owner-managers to receive direct advice from an experienced professional, discussing a range of policy options available from different insurers and arranging any additional cover they might need to ensure their business is properly protected.

Consulting a professional is especially important for home-based companies, as standard home contents policies may not cover any stock or expensive equipment kept within the property.

Brokers and advisors can also inform start-ups of the compulsory insurance needed when starting a business. For example, third party motor insurance is required for companies that use vehicles, and those which have more than one employee must have employer’s liability insurance worth at least £5 million. Firms that do not have these policies can face prosecution for not having the correct cover.

Established firms should also contact their broker, and revisit their insurance policy regularly, because over the year the prices of assets or stock may have increased or decreased in value, meaning their policy might have to be adjusted.

Finally, fast-growing businesses should review policies following any period of growth, such as taking on new contracts, hiring staff, or purchasing machinery. Failure to declare any changes could leave a business without the correct cover.

According to research by the Federation of Small Business, SMEs account for 99 per cent of all private sector firms in the UK. One size does not fit all and there is no one insurance policy that can provide cover for the vast range of enterprises in this sector.

Seeking the advice of an experienced professional will allow businesses to find a policy that is tailored to suit the business’ specific needs, eliminating the risk of underinsurance. The cost of failing to do so could be severe.

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