Business owners who are under pressure due to the tough economic environment should avoid cutting back or cancelling their short-term insurance as they could be left in a far worse predicament.
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers says having insurance coverage is critical when a business is going through turbulent times. During this period, the business faces a multitude of risks that could lead to liability issues by failing to provide a service or meet the needs of its customers.
He points out factors that businesses should consider before taking any drastic measures:
Contractual obligations – for some businesses, having adequate short-term insurance cover is a contractual requirement which needs to be met, always.
For example, when contractors are awarded a contract to construct a building, some contracts require that the contractor has short-term insurance cover in place for the duration of the contract.
Alternatively, when purchasing a franchise, the bank and franchisor may require that you have adequate cover in place as part of the agreement. The same principle applies when a bank finances the purchase of a commercial property.
Transport and logistics businesses are also required to have some form of short-term insurance cover to ensure that their clients’ goods are protected.
Financial impact of cutting cover – before you amend your short-term insurance policy, it is essential to assess the risk impact of the cover you are cutting back on – how would it impact business operations and continuity of the business following