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How To Properly Secure Your Business From Unexpected Risks
How To Properly Secure Your Business From Unexpected Risks

Posted on August 30, 2021 | by | Posted in Uncategorized

There are a slew of unavoidable obstacles that your company must learn to overcome.  Business risks are referred to the dangers companies face to meet their objectives. Furthermore, risk in business involves the possibility that a company’s or organisation’s plans may not come out as anticipated, that it will miss its target, or that it will fail to fulfil its overall goals.

It is difficult to shield your business from risks entirely. However, these problems may overwhelm your firm if you do not have the appropriate plan, strategy, and tools in place.

Therefore, as business owners, it is your responsibility to create plans that will help you face and manage potential business risks in the future. 

Identify your potential business risks

An insurance broker’s expertise, a business mentor’s experience, or your business networks’ wisdom might be beneficial for this particular purpose. Other than that, you can also seek guidance from online resources published by the government. However, to give you a brief overview, here are some risks you have to look after: 

  1. Reputational risks:  Reputational risk can manifest itself in a variety of ways. The first is direct, which is a result of the company’s conduct. For indirect risks, these are the activities of one or more employees. 
  2. Economic risks: Exchange rate changes, a shift in government policy or legislation, political instability, or the imposition of financial penalties are all possible economic risks.
  3. Competitive risks: Competitive risk relates to the competing firms on the market, each of which strives to acquire the top position and consumer ratings in order to reap the most advantages.
  4. Compliance risks:  Compliance risk is those of breaches of laws, rules, codes of conduct, or organisational standards of behaviour posed to a company’s financial, organisational, or reputational standing.
  5. Market demand risks: Demand predictions are commonly used to guide capital investments, marketing, sales, and supply chain choices. The danger of losing money due to a mismatch between anticipated and actual demand is market demand risk. 
  6. Technology risks: Information security events, cyberattacks, password theft, service failures are all possible technological business risks. Each form of technological risk carries the danger of financial, reputational, regulatory, and strategic consequences.

Conduct proper risk analysis

Upon identifying your risk, you will need to analyse and then plan your strategies. This will include determining who will work on the plan, how much you plan on spending, and more. 

Consult with your stakeholders 

If you are a relatively new business, you will need to consult with your investors for valuable risk advice. This is the same if you have been in the industry for quite a while. Your stakeholders have surely gone through your quarterly reports in detail, and some will know your figures like the back of their hands. Thus, they can help in giving their thoughts on possible or potential risks. 

Managing business risks

Risk management has always been a crucial component of every organisation, especially when the market goes through a slump. Below are some steps you should take when attempting to manage the risks that come your way: 

  1. Sort your priorities: You can scale your risks based on the chances they can occur to your business, considering how well you are performing. Of course, a risk that falls into those that will most likely happen should take precedence over the others, and a strategy should be put in place to minimise or at the very least reduce these risks.
  2. Acquire insurance: You may also get insurance to protect yourself from a variety of company dangers. Some insurances, such as workers’ compensation for injuries to your employees or professional indemnity for specific vocations, are required by law. Others, such as management responsibility, are common sense. For more guidance, speak with your insurance broker.
  3.  Liability management: If you are the sole owner of your business, consider forming a corporation or limited liability company. This will make you less personally accountable for the company’s debts or other liabilities. 
  4. Set a feasible timeline: Once you have properly identified the risks, you must determine when you want it done. If a project is completed too quickly, something may be overlooked; if it takes too long, the team may lose trust in the system or get frustrated. Thus, you must do a lot of planning and proper predictions to achieve this.

Ensure that you have covered all of your bases

Most businesses are aware of the need to insure their company assets, such as buildings, goods, and cars, against calamities such as fire, theft, or damage. This helps compensate for any revenue loss if you are unable to trade due to an unforeseeable occurrence. It also covers you if you are unable to enter your premises owing to damage to neighbouring properties. 

Insuring your business

Businesses can choose from a variety of insurance options to protect themselves from these threats. Below are just a few forms of insurance that a company should put in place: 

  1. Property insurance: Property insurance financially helps business owners in the event of damage or theft. These insurances also offer assistance to those who have been harmed on the property.
  2. Professional liability insurance: On the other hand, professional liability insurance covers professionals such as accountants, attorneys, and physicians from claims brought by their clients for negligence or other reasons.
  3. Workers’ compensation insurance: This is a government-mandated system that provides monetary compensation to workers who are injured or handicapped while on the job.

Product liability insurance: Finally, product liability insurance protects your company from lawsuits alleging bodily injury or property damage as a result of the items it sells. Its primary goal is to pay for legal fees and damages.

Insurance Renewal: Questions You Need To Have Answers For
Insurance Renewal: Questions You Need To Have Answers For

Posted on August 30, 2021 | by | Posted in Uncategorized

Businesses require insurance to assist cover the expenses of property damage and liability claims. Without it, a company’s owners may be forced to pay for costly losses and legal claims out of pocket.

Every year, insurers change their offers and pricing. In return, it has become the responsibility of business owners to determine whether to retain the current policies, make changes to the plan to reduce costs or switch if a more cost-effective alternative is available. 

Your insurance provider will examine your policies on an annual basis to verify that they continue to fulfil your firm’s demands. This evaluation should be done a few weeks before your current policies expire. A leading insurance broker in Perth such as Matrix Insurance would advise getting in touch as soon as you can.

Furthermore, below are some questions you will most likely be asked when renewing your insurance: 

Has the ownership of the business changed?

There are several considerations to be made when a firm loses or obtains a new owner. One key factor to examine is who is responsible for the company’s retroactive coverage. It is also critical to double-check that the persons and businesses mentioned on all insurance policies are still correct so that their insurable interests are covered.

Has the value of your property increased or decreased?

Typically, the worth of your property and the amount of insurance coverage do not directly correlate to each other. A home’s insurance should cover the expense of rebuilding it. The majority of small firms insure their assets at replacement cost. If construction expenses in your region have risen in the previous year, you may need to increase the building limits on your property insurance policy. 

Have you remodelled your property or done any major repairs?

Property improvements are a fantastic way to add value to your home while also personalizing it. However, you may become so preoccupied with repairs and day-to-day life that you forget to notify your insurance provider, which might have significant consequences. Expansions are also considered a company’s long-term strategy. All new offices should be revealed to evaluate whether any modifications to present policies are necessary.

Do you expect your revenue to rise or fall in the coming year?

Business insurance protects companies from financial losses caused by incidents that occur in the usual course of business. Your business can be at bigger risk the more business you conduct, the more interactions you have, and the more income you generate. Thus, you come up with an accurate estimate of your future revenue.

Is your business engaged in the same activities as it was a year ago? 

If you have changed the services or products you have initially served, it may change the entire coverage of your insurance plan. Specifically, professional liability insurance coverage may need to be adjusted as a result of changes in service offerings, and firms that update product lines should review their general liability policy’s product liability coverage.

Has your company purchased any new property, such as automobiles, in the previous year?

If you have purchased assets such as property and automobiles, you need to employ additional insurance policies for more coverage. Firms may need to add hired and non-owned auto insurance if workers use personal vehicles for company reasons. However, keep in mind that work-related driving is generally not covered by personal vehicle insurance coverage. 

Is vital client information kept on file at your company?

Much like the different factors on our list, holding critical client information increases the risk of your business. If the security of this data is breached, your organization may be subject to legal action. Furthermore, as consumer and market data and business intelligence become increasingly complex and important to corporate success, any damage to it, or the systems that store or modify it, might have significant financial and operational consequences.

Have your internal systems evolved in the previous 12 months?

Approving new vendors and workers, storing important inventory and checking stock in secure places are some functions of internal systems. These systems could ultimately make your business more vulnerable to cyber liability concerns. In return, you will need to acquire cyber liability insurance or at the very least have a strategy in place to deal with the many types of assaults that might occur. You would also have to consider your accounting systems and these employees since any modifications might expose your firm to employee theft losses.

Other factors to think about: 

  1. New potential business plans
  2. Change of location 
  3. New equipment and machinery 
  4. Change in business structure
  5. Increase or decrease of workforce
  6. Variation in business income prepared to previous years 
  7. Changes in inventory
  8. Installation of security equipment 

Reviewing your insurance renewal: 

When renewing insurance policies, some owners fail to review them properly. Moreover, renewing your plans without first examining them might end up costing you money in the short and long run. 

If the modified conditions on the old plan are not acceptable, businesses will need to search for a new provider or plan that better suits their needs and budget. Thus, it is imperative to properly examine all pertinent data, such as monthly premiums, deductibles, and more.

Furthermore, other coverage types you should be aware of include: 

  1. Commercial property and liability
  2. Cyber liability insurance
  3. Workers’ compensation
  4. Commercial auto 
  5. Professional liability

What you should do before you renew your business insurance: 

All changes, from minor to major, must be taken into account during the policy’s coverage duration and at renewal. Thus, you will need to examine insurance requirements and rates in light of seasonal fluctuations in operations and inventories. Also, make sure to look for policies that relate to cyber liability. This is because of the kind, quantity, and privacy requirements of financial and other private records, data protection coverage that addresses third-party liability is critical.

The 2021 Ultimate Guide to Coinsurance and Underinsurance Clauses
The 2021 Ultimate Guide to Coinsurance and Underinsurance Clauses

Posted on July 27, 2021 | by | Posted in Uncategorized

Coinsurance is a provision typically expressed in percentage that firms employ in contracts for property insurance policies, such as in buildings. The condition will guarantee you that your property is insured for a specified and reasonable amount. In addition to that, as a policyholder, you will be entitled to obtain a premium for the risk. 

Most commercial plans include a coinsurance clause that specifies how much of your property’s worth must be covered to be compensated entirely in the event of a loss. Furthermore, the most frequent split in terms of coinsurance is 80/20. Here, the insured will be responsible for paying 20% and the insurer for the remaining 80%. 

An inadequate insurance policy is referred to as underinsurance. An underinsured business policy will leave you accountable for substantial financial costs if an unforeseen catastrophic incident occurs. This happens when a property is insured for less than its actual value, making the coverage insufficient. 

What happens if your property is underinsured? 

Let’s say you own a building you initially determined was worth about $120,000 in replacement cost. You then have established an 80% coinsurance in your policy, not knowing that the replacement cost of the building was actually $200,000. A fire then unfortunately burns the property, and you were accountable for covering $80,000 in damages. To determine how much your insurer will cover, we will need to divide the determined insured replacement cost of $96,000 (80% of $120,000) with 80% of the actual price of $200,000 or $160,00. In this case, you will receive only 60% of the claim, which is $48,000. 

On some occasions, your insurer may even void the policy or cancel it entirely and return any premiums paid. 

Therefore when purchasing insurance, one of the most crucial factors to consider is the amount of coverage you require. If your insurance is insufficient and you encounter accidents or disasters, you may pay a lot more than you expected. Since each insurance type offers various levels of coverage, you should also take your time to choose the best fit for your requirements.

Reasons why your business may be underinsured: 

If you’re underinsured, it means your assets are undervalued and insured for less than their current rebuilding or reinstatement cost. As a result, like the example above, your insurance reimbursement may be decreased if you file a claim. 

Most common causes of underinsurance: 

  1. Your property and or its contents were not adequately valued.
  2. You’ve renewed your insurance, but you haven’t gone through the specifics of how your situation has altered. 
  3. You have done remodeling or improvements inside your property and have not accounted for them yet. 
  4. You failed to include the costs of rebuilding, demolition, or debris removal in the overall cost. 

How to avoid underinsurance: 

While the consequences of having an underinsured building seem irreversible, underinsurance is completely avoidable. With that said, here are some ways you can avoid an underinsured building. 

  1. Utilize a construction calculator 

When it comes to your property and contents insurance, everyone’s demands are different, so determining their worth is definitely tricky. Carpenters, building contractors, and construction management professionals often utilize a construction calculator to estimate and calculate other construction parts. 

Moreover, to determine how well you’re protected, perform an approximate calculation of how much you are insured for per square foot. It’s crucial to remember that calculators are just intended to serve as a reference for rebuilding your current structure. Due to local government rules, reconstructing the same design and materials after a total loss may not be possible. Therefore, always take into account the change in costs and adjustments in policies.  

  1. Study building regulations 

Building rules vary over time, which can increase the rebuilding costs. So if you have owned the property for a while, there is a huge chance that its overall value has changed substantially.

As a property owner, it is your responsibility to check whether your insurance includes enough coverage for building code improvements. Read your policy paperwork to understand what is and is not covered. 

  1. Account for the additional expenditures of rebuilding.

If you have installed remodeling and renovations in the past years, it is imperative to include them in your policy. It is also a good idea to notify your insurance company of any of the new work done so that you can update the property coverage. Not only that, but make sure your insurance includes additional expenses like debris disposal, architectural, demolition, and engineering, and council fees.

This is essential because when the value of your property increases, it will influence your premium and excess amount.

  1. Seek for professional property appraisal

Aside from the fact that specific insurance plans need an appraisal before a policyholder can submit a claim, having a current assessment on hand is a good habit for a property owner to develop.

The cost of rebuilding your building may also differ substantially from its market value. Through the help of an agent or broker, you can either increase or maintain the policy limits. Instead of making a rough estimate, get a formal assessment from a licensed builder or professional valuer. Not only will they be able to provide you with an accurate rebuild cost, but they will also factor in other charges.

Obtaining an appraisal for your commercial real estate or retail location will make submitting an insurance claim easier. When you know you’re insured, you don’t have to worry about whether the damage to your property is covered.

What to Know When Dealing with the Death of a Business Partner
What to Know When Dealing with the Death of a Business Partner

Posted on July 27, 2021 | by | Posted in Uncategorized

Death alone is a difficult subject to broach. But it is essential to have this discussion, especially at times when necessary. Moreover, trying to figure out what will happen if you or your business partner dies is a genuine concern to all business owners. While nothing really prepares you for the loss of a person, you can alleviate most of the difficult matters by arming yourself with adequate knowledge.

Death of a business partner 

When handling the risk management strategies for your business, you should not only include physical injuries or illnesses. Rather, you should also take into account the possibility of unforeseen tragedies happening to a partner, such as death.

When safeguarding your company from the consequences of such an occurrence, you should not leave it all up to your attorneys to settle the matters after the incident. With that, here are the options available to you should you encounter death of a partner:

  • Liquidation and distribution of remaining assets:  

If forming a new partnership is not in your plans, this is the alternative to pick. However, you should not opt for liquidation if you are not willing to invest a lot of time and effort. It is possible that the remaining owners may realize that liquidation is sufficient to satisfy the estate of the late partner. If this is the case, you may be required to sell the remaining assets based on their market values and distribute the profit to the remaining partners. 

  • Dissolve the company completely: 

Ultimately, the remaining partners lose their ability to bind the partnership once a partner’s death triggers dissolution and winding up. Moreover, your agreement or state law may compel or allow you to terminate your partnership. Before doing so, the majority of the remaining partners must agree with the decision. In the event that the majority has opted for termination, the company will then proceed to wind up its operations. This will include completing or closing projects and settling existing debt.   

  • Buy your late partner’s assets:

The main issue that comes with this option is determining the right price of the assets. Moreover, this can be especially challenging for new companies who have valued their inventory based on future revenue. Therefore, the most advisable step to take is to seek help from professionals. 

  • Sell out to the heirs:

You may also want to consider selling your company to the surviving spouse of your partner or other remaining heirs. However, only choose this option if you are confident that the heirs of the late partner are willing, qualified, and competent enough to take part in the company. Just like the previous choice, the most challenging step of this option is establishing the right values for all the assets.

Business Partners’ Life Insurance

A life insurance payment might help a firm get through a difficult period by providing operational funds. Moreover, it can also assist remaining partners if they plan on purchasing the shares of the deceased partners from his or her heirs. With that in mind, you can come up with an insurance policy that clearly identifies the beneficiaries of a partner. 

Do you have a buy-sell agreement? 

Before you take any action, you must first determine whether a buy-sell agreement with the late partner has been established. This is a legally enforceable contract that specifies how a partner’s shares will be transferred if that partner dies. Moreover, the contract is often entered into by the partners and their spouses. In most cases, a buy-sell agreement is established along with the initial partnership arrangement. If there has been an agreement in place, the stated steps your company will take if a partner passes away will be followed. 

Furthermore, the contract may state that the business share must be sold to the company or the remaining partners based on a respected formula or percentage. Also, partners may be prohibited from selling their shares to other investors unless they receive the approval of the remaining partners. 

If you have failed to make a buy-sell agreement with the late partner, you can turn to the Partnership Act of your state. 

Why should you have insurance protection for your business? 

Just like you, your business partnership needs life insurance. This is a necessary component of your operation, as your company might incur serious penalties if you fail to secure one. 

Moreover, there is no harm in planning ahead and preparing your business for unforeseen and unfortunate events. The main reason you should acquire life insurance is to safeguard yourself in the instance where one of the partners passes away. Insurance plans for businesses can be designed such that the earnings are returned back to the firm to help with cash flow and cover extra expenditures. Specifically, it will help you deal with loans, expenses, funds, and assets easier.

How can I acquire business insurance

Business life insurance works in the same way as ordinary life insurance. Furthermore, it is just as essential to find the proper insurance provider as it is to acquire adequate policy coverage. You will need the guidance of an expert who can help you create a strategy to deal with such a situation. 

Each company has its own set of requirements. Therefore, you need to consider your sales, number of employees, assets, location, etc. The insurance representative will guide you in determining your needed coverage and most applicable policy. After you’ve learned about the various insurance coverages available, you should look into which ones are ideal for your company.

HANDLING AN UNDERINSURED HERITAGE BUILDING
HANDLING AN UNDERINSURED HERITAGE BUILDING

Posted on July 01, 2021 | by | Posted in Uncategorized

Every property owner, company owner, or homeowner should be aware of the requirements to attain proper building insurance. In the case of heritage structures, there are several conditions that should be met. As we always recommend, it is worthwhile speaking to a leading insurance broker in Perth if you require any additional information.

Replacement Value 

Getting insurance for heritage-listed properties is one of the most prevalent worries of owners. For one, these infrastructures need to be insured for their total replacement value. This figure is essential as it determines the amount it would cost to entirely replace the property. Furthermore, to arrive at the replacement cost, you will need to compute for the following: 

  1. Cost of labor: total cost for all workers in terms of salaries, benefits, and payroll taxes
  2. Cost of materials: cost of materials used in the construction of the property
  3. Architect fees: most of the time, this number is a percentage of the project’s total construction cost
  4. Engineer fees: this is somewhere between 1% and 20% of the project’s total construction cost

Typically, the replacement value of properties is not inclusive of premiums on materials, overtime fees, and bonuses. Furthermore, the appraiser will also take into account foundation and footings, exterior walls, interior walls, finishings, framing materials, etc.  

Rebuilding Cost 

Moreover, most insurers require a valuation for the costs of rebuilding such premises. As the name suggests, this is the total cost you would incur to rebuild your property should it be damaged beyond repair. 

In addition to labor cost, material costs, architect fees, and engineer fees, you should get in touch with a professional to help you compute for the following: 

  1. Development of property: includes but is not limited to the construction cost, government fees, permitting cost, inspecting fees, etc.  
  2. Debris removal fees: in computing this amount, you will need to establish the area covered by the debris, the amount of waste, etc. 
  3. Demolition fees: similarly, this is computed by square footage 

Other factors that contribute to the reconstruction or rebuilding cost involve the removal of mold and other hazardous materials. Unlike the replacement value, reconstruction costs may consider premiums and other added payments. 

Essentially, the main difference between the two is that replacement costs pertain to the amount required to reconstruct the building entirely. On the other hand, reconstruction cost is the amount needed to replicate the infrastructure.

Average Clause 

An average clause is found in almost all insurance policies. This is basically an insurance policy provision that calls for you to bear a part of any loss if your property is insured for less than its total replacement value. So, if you have underinsured your property, your insurer will only pay a percentage of your claim. 

For instance, Kara’s building was only insured for $200,000, when in fact, the building actually cost $800,000. Following an electrical fault, Kara went on to claim her insurance. Accordingly, the damages brought by the incident are worth $50,000. However, since her building was only 25% insured, she only received a $12,500 payout. 

Another way to compute the amount to be claimed is by multiplying the actual loss and insured amount. The product will then be divided by the actual value of the property during the incident. 

In the example above, we derive at: 

Claim amount= ($50,000 x $200,000) / $800,000 

Claim amount= $12,500

This was the case for Kara because she was only able to cover a certain percentage of her property. As a result, her claims will also cover the same rate. 

This is only one of the many reasons why you should ensure that your property is adequately insured. 

Heritage Building Valuation 

There seem to be no definitive criteria for valuing historic structures. While there have been established concepts applicable to more modern buildings, they do not always apply to historic structures. 

Designs, locations, conditions, local and national legislation are all factors to consider. 

Materials and maintenance 

Another factor examined by valuers is the general condition of the structure. This is inclusive of the building’s electrics, plumbing, and how well it has been constructed and maintained over the years. A failure to comprehend the proper materials and skills required for heritage building restoration could result in underinsurance.

Historic building preservation and repair calls for specialized knowledge and abilities. Specifically, there is a need for a thorough understanding of locating and using traditional materials and techniques.

Furthermore, if you are seeking insurance for your heritage building, ascertain that the property is in good condition or repair. 

Condition and improvement 

It is ideal to seek advice from site inspectors as they offer independent and accurate evaluations of your property. In addition to that, you should also conduct surveys and analyses. 

Specifically, you will need to assess and document the notable features and updates on the area. 

For these improvements, it is strongly encouraged to keep receipts of them for more additional records. 

Possible risks 

Insurance is primarily concerned with risk underwriting, which involves estimating the possibility of loss and its frequency and severity.  Furthermore, calculating a rate or premium that is proportionate with that risk is also necessary. 

Loss of heritage value 

Suppose the heritage value of your property has been lost due to damage or deterioration. In that case, the Queensland Heritage Act 1992 states that there is no more need to conduct any replication of the building. If it is partially damaged, any reconstruction work must be done in a way that respects the building’s heritage values.

In line with this, it is also imperative that you understand the true significance of your structure along with its essential characteristics. 

You should also take into consideration the demand of the property or who is willing to purchase it.

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