With pressure on cash flow and operations suspended, many businesses are looking at costs and considering cancelling or not renewing their insurance during the lockdown.
Whilst this may seem to make sense to some, it is worth looking at some aspects of business insurance policies, especially in the SME sector, that should be considered as cancelling insurance policies could be very costly in the long run.
We have been speaking to a number of clients in recent weeks and some of the issues that have arisen are summarised below.
The reasons for not cancelling your policy fit broadly under three categories;
- Legal Requirements
- Exposure to Claims Made During the Shutdown Period
- Continuing Risks that Still Exist
Looking at the above categories, we can provide a few examples of where these apply.
- Motor Insurance is a legal requirement for all vehicles unless they are laid up and subject to a SORN
- Employers Liability Insurance is a legal requirement for businesses that have employees. This legal requirement is not negated by the fact that employees are not working. More information on the legal requirements of employers liability may be found here.
- Insurance underwritten on a claims made basis, where the policy providing cover is the policy in force when the claim is made. If the policy is lapsed or cancelled it does not cover any subsequent claims, even if the matter giving rise to the claim occurred whilst insured. This is the standard basis for professional indemnity insurance policies and malpractice policies and will also affect a number of products liability insurance products. More information on claims made policies here.
- Products Liability insurance for “products the field” where cover on a claims occurring basis requires a policy to be in force when the claim occurs. So there is no cover if a claim occurs after a policy is lapsed or cancelled even if the goods were sold or work was undertaken whilst insured.
- Property owners liability, including leaseholders, where the liability arising from the property continues whether trading or not.
- Property Damage policies that protect the policyholder against the risk of loss or damage to assets owned, leased, hired or which a policyholder is responsible continues whether trading or not.
- Contractors plant policies that cover risk of loss or damage to plant owned, leased, hired or which a client is responsible continues whether trading or not.
- Silent works or dormant contract sites still face the risk of loss or damage to works and liability arising from the works or site continues whether trading or not
We are happy to discuss any of these aspects with you or talk to you about other circumstances that you may be concerned about. Please call us directly to discuss your needs.