BUSINESS finance

Insurance is the hot word on everyone’s lips as we reassess the fallout from natural disasters throughout the country.

Words Stephen Brown, former CEO vegetablesWA

WHEN the Mariginiup and Gingin fires burnt through paddocks, businesses and some homes late last year, many in the industry were thinking one thing: insurance. Whenever a fire (or any other natural disaster) occurs in any industry, but particularly agriculture, the big concerns are: are you under or over insured?

The most common is obviously under insured. But what does this mean? If you’re under insured, the cost of replacing what has been destroyed or damaged will not necessarily be covered in full under your insurance policy. And we get that this can happen. Sometimes the outlay to purchase insurance can seem cost-prohibitive or a detterent.

“ Costs of buildings and the replacement costs of buildings has increased by 40 to 45 per cent since Covid. So, the big question is: have you reassessed your insurance policy and increased your sums insured accordingly? ”

However, sometimes this also occurs when a business simply hasn’t reviewed their insurance for five years or so.

When this situation results in you or the business not receiving sufficient funds to replace any buildings, plant and equipment or machinery, it can be a major disruption and, in severe cases, can send a business into liquidation. There have been some examples of this recently due to natural disasters in other areas of Australia.

Under insurance is a particularly big problem at the moment. Costs of buildings and the replacement costs of buildings has increased by 40 to 45 per cent since Covid. So, the big question is: have you reassessed your insurance policy and increased your sums insured accordingly? This is an exercise that should be done every year. When your insurance renewal is processed in conjunction with your insurance broker or agent, or if you deal direct with an insurer, you should get your renewals six weeks in advance, and you should be checking that your sums insured for all your plant and equipment are correct.

So what is the correct sum? The correct sum insured is the current replacement cost. If your packing or machinery shed would cost $240,000 to replace if it were burnt down or destroyed in some other way, then you should be insured for $240,000. You should also talk to your insurer about any additional costs to cover clean up after a major disaster.