Protecting your assets
David Moir, specialist account manager of Burbank Insurance Consultants and authorised representative of Action Insurance Brokers, answers some important questions that are sometimes overseen to help you lessen risk and protect your assets.
As insurance advisors, we get asked many questions. The most common question is “Can I get cover for my…” We enjoy getting questions like this because it gives us the chance to add value to our clients. As we are not a direct insurer who can only provide advice
on the products they offer – we offer advice on almost all general insurance products in the market. We often get questions unrelated to the product we are covering; for example, we may facilitate cover for a small business and the owner might contact us with questions about insurance for an investment property.
It’s the questions we don’t get asked, and the mistakes often made by clients because they don’t ask the right questions, that cause us the most concern. I thought I would provide some answers to these questions, which may be important to you if you own plant and equipment or operate a small business.
- Is my equipment covered if I hire it out to another party without an operator? In the industry, this is called ‘dry hire’. Some policies will automatically cover goods while on dry hire regardless of an existing contract, while other policies will extend cover to dry hired items provided there is a dry hire contract in place and the insurer has sighted the contract. In the third instance, dry hire is excluded. That means no cover will be provided to your equipment if it is under the supervision and custody of another party.
If your policy is a standard business pack policy or farm pack it is more than likely that dry hire is excluded. If you have a mobile plant policy, the insurer may ask to see the hire agreement you have with the other party. The reason for this is that they want to check the contract to see what the terms are in relation to any recovery they might have against the other party in the event the claim is caused out of their own negligence. If the agreement totally absolves the other party in all circumstances, the insurer may still decline to provide dry hire cover.
An option is for the client to ask their insurer to cover losses while on dry hire and to provide a damage waiver to the client they are hiring the equipment to. It is important to remember that damage waiver losses will then be included in your claims history and will need to be disclosed when quoting for at least five years, meaning it will add to your overall insurance costs for many years to come.
I would recommend only providing damage waivers to parties you have a long terms relationship with and provide you with a large percentage of your turnover.
Clients you might deal with on a one off basis, you might be better off dealing with them without a waiver in place. If the insurer decides to recover on the claim, the overall cost of the claim to your policy will be less if recover is successful.
- Do I need to conditionally register my movable plant and equipment that is not road registered and if I don’t, can this affect my insurance cover? Conditional registration is for vehicles that do not comply with the Australian Design Rules and in New South Wales a list is provided by the RMS of these vehicles that require conditional registration and the correct equipment they require for operation (see http://www.rms.nsw.gov.au/roads/registration/get-nsw-registration/conditional.html).
This would include excavators (tracked and wheeled), forklifts, ride-on mowers, tractors and the like.
As a rule of thumb, if your equipment is used solely by you on your own property, no registration is required. If; however, you operate that equipment away from your own property, whether that be on other private land or simply crossing public roads, you will be required to conditionally register.
Failing to do this could result in a claim not being paid in the event of an accident. Your insurance policy will have two or three distinct sections – the property damage section and road risk liability sections and (perhaps) a public liability section. Let’s keep this in mind and consider the following claim scenario.
A forklift that is unregistered, travels with a truck to make deliveries of bricks. The truck stops in the public road and the forklift is detached. The forklift positions itself in the road to lift the bricks off the truck and drives them around into the client’s premises. While returning to the truck, the forklift does not see a car approaching behind the truck and collides with it. In this instance, the insurer is within their rights not to pay for the damage of the other party (road risk liability) as the forklift was being operated ‘illegally’ on a public road. The client would get their own forklift damages paid for under the property damage section but it is unlikely the insurer would pay for the other party’s damages under the road risk or public liability sections.
Conditional registration also requires that a CTP policy is in place which, in the scenario above, would have covered any injuries to the parties in the car.
Another scenario is where a client operates within a Business Park. They do not think they have to register their forklift as they only use it within the Business Park. In reality, their property ends at the roller door of their unit and the area outside the unit is common strata property. As this is common property, the forklift would need to be registered in this area and again this could provide the Insurer an excuse to decline or limit a claim.
- What are common mistakes with insurance policies that might cause me to be uninsured?
Four of the most common mistakes made by clients that might cause them to be uninsured include:
- Thinking your policy covers ‘everything’ – this is probably our most common problem. This might be the fault of new business owners that have not had much experience with commercial insurance policies. Commercial insurance policies are often ‘packaged’ so that a client can select covers that they want to insure for, and leave off covers that they do not want cover (and don’t want to pay the premium for). A business package policy may have sections for money cover – to cover the physical cash takings and machinery breakdown – which could be to cover air conditioning or a walk in refrigerator. If the sections are not taken, you do not have this cover. It can be confusing, and this is where an advisor can be really useful in explaining what the section covers.
- Forgetting to add an item – at renewal, your focus is on checking what needs to be covered. During the year, clients often purchase items but forget to add them to the policy. You really don’t know when a loss could occur, it could very well be the day after you make your purchase.
- Incorrect description of business – this impacts your public liability insurance and is one of the dangers of arranging your business insurance online. The liability sections cover you for your actions of the described If you cause damage to another party because you are doing a business activity not described in your business description, you might find you are not covered
- Moving and forgetting to change you address – contents cover is linked to the situation address your provide. So if you are to move during the period of insurance and your contents are now at another location, should you have a claim, they will not be covered. Always put a ‘change address for insurance’ reminder on the list of things to do when you are moving.
Your advisor is there to assist you with all your general insurance matters. Your advisor is there to protect YOUR interests, not the insurer’s. Ask them the questions before, rather than after a claim occurs to protect your assets.