You need insurance for many of the good things in life – travelling, running a business, buying your home, etc. These are all important things to protect from hazards, however no one teaches you how to buy the insurance to give you that protection. Especially not many of the insurers selling it.
When most of us – I’m including both consumers and businesses here – go to buy something, we look online for what we think is a good deal. We’re blissfully ignorant that taking this route can leave you high and dry if you need to make a claim. Even if you’re usually pretty switched on, you don’t know what you don’t know (we’ll get into that later).
So, if you’re thinking about buying insurance online but are worried about wasting thousands on a policy that won’t come through, this is an article for you.
Based on my 13 years as an insurance broker, these are the top three common mistakes people make when buying insurance online.
1. Putting The Wrong Business Name on the Application
Getting your name right on a form seems like primary school stuff, but people get it wrong on their insurance forms more than you can imagine. While a fat-fingered typo won’t necessarily be a deal-breaker, forgetting to add the correct business identifier or writing in something altogether different from your business name could be.
I’ve seen countless businesses that might have come undone because:
- They’ve registered under the parent company’s name, but are trading under a different business name.
- They’ve changed their business name, but the old name is still listed on their policy.
- The name of the business they’re trading under is incorrectly listed in their policy documents, and actually describes another company with a similar name.
When scenarios like these come up, the result is usually a lively discussion between the policyholder, the insurer and sometimes the ombudsman about the purchaser’s “intent”.
If you bought the policy in good faith but under a technically “wrong” business name, you may still be able to claim, but is that an argument you want to have after you’ve just suffered a significant loss?
If you’ve used one business name instead of another because the business you’re actually trading under has a dubious past, the insurer will most likely not view that as good faith – more like deliberate non-disclosure. It’s very likely you can say goodbye to your claim, your cover and all the premiums you’ve been paying out!
What’s the easiest way to avoid this situation? Get advice someone you can trust!
2. Thinking Near Enough Is Good Enough When Listing Your Occupation
Drop-down menus catch a lot of businesses out when they’re applying for the regular forms of insurance, such as business insurance, public liability or professional indemnity.
Here’s how it happens:
- The site asks you to choose your occupation from a drop-down menu.
- Your exact business type is not listed, but there is one that seems close enough.
- You pick that one.
- You click “Buy”.
- Congratulations, you just bought an insurance policy covering work you don’t do!
Case in point: I recently worked with a hi-tech cleaning company that microbially purifies business premises top to bottom. The business thought it was doing the right thing when buying insurance through a comparison website. Later, when the owner came to me to review the policy, I saw the business was categorised as carpet cleaning.
The business hygiene provider had already been operating for months. If an incident had occurred regarding any operations not related to carpet cleaning, then they wouldn’t have had any cover at all! Like any innovator, this business didn’t fit neatly into any of the standard menu options. We soon got their insurance sorted out through working directly with the insurer.
If you’re not sure if you’ve listed your occupation correctly, don’t be an ostrich. Pull your head out of the sand. Pick up the phone and ask your insurer to specifically note your occupational duties on the policy. If they won’t, there’s probably a good reason: they don’t cover those activities. Find an insurer who will or find someone who can help you get it right.
3. Relying On Comparison Websites For All Your Research
Comparing policies online might feel like due diligence, but comparison websites aren’t actually there to give you great protection; they’re designed to make money from referrals.
Here’s why comparison websites rarely offer business owners the best value:
- They offer one-size-fits-all policies: Your business is (or should be) different from every other company in your industry. Your insurance has to reflect that. Comparison sites don’t give much opportunity to tailor a policy to your unique risk profile. This means most people who buy online either end up underinsured (i.e. with spotty coverage) or overinsured (i.e. paying excessive premiums).
- The pool of insurers they draw from is tiny: As insurance brokers, we can access about 140 different insurers and thousands of policy wordings. As a consumer on a comparison website, you can only choose from maybe 6 to 10 different options. Plus, you have no way of knowing how the insurer you select responds to claims. We, on the other hand, know which insurers have a reputation for wriggling out of paying and which ones are known for behaving themselves when claims come up.
- The devil is in the detail: It’s not always easy to know what you’re signing up for. Just like I have good knowledge about contracts but always get a lawyer to review mine, it’s always a good idea to get an insurance broker to review your policy before you sign it. At the very least, make sure you know the definitions, understand the policy limitations and are across the sub-limits.
A Simplistic Solution Usually Causes More Problems Later On
There is a big difference between simple and simplistic:
- Something made simple still works properly
- Something made simplistic doesn’t.
Buying business insurance can be a simple process if you have the right advice. But buying business insurance online is usually a simplistic process because you don’t have the right advice. You will pay good money for a piece of paper that says “policy”, but how much faith can you put in it?
Did you just bet your entire business on a policy you bought from a “Meerkat” after 10 minutes of clicking drop-down boxes with options that seemed close enough?
An online comparison site might be completely fine if you have a mainstream kind of business. However, if your business is an innovator or a little left-field – like the corporate hygienist in the example – you’re going to find plenty of things the comparison sites can’t do.
So, get your existing policy out or download all the details on the one you’re thinking of buying. If there is anything you don’t understand, that’s your trigger to call someone you trust to get an explanation.
My advice is that diving in and buying insurance without a good level of understanding is a not a good business risk to take.
The way I see it, your edge in business comes from controlling and consciously engaging with certain ‘good risks’ on an ongoing basis. It’s why I always say Risk-Reward-Repeat. The other side of this is that your business insurance is there to mitigate the bad risks.
So, don’t make buying your insurance a bad risk in the first place.
