By Gabrielle Toscan, Managing Director
We review the insurance of Warrnambool business owners every day, from dairy farmers and tradies to cafés, retailers and Great Ocean Road tourism operators. We regularly find gaps in cover that are costly and completely avoidable, and the same ones keep coming up.
And we do get it: insurance isn’t front of mind when you’re juggling everything else that comes with running a business. But skipping a review of your cover with an experienced Warrnambool insurance broker could end up costing you hundreds of thousands of dollars. That’s worth an hour of your time.
Knowing these traps could be the difference between your business surviving a claim or closing its doors for good.
Here are the seven we see most often, and what to do about each one before your next renewal.
Trap 1: Underinsurance - your building is insured for what it cost years ago
The Vero 2025 SME Index found 58% of small and medium businesses don’t review their sums insured each year. So if that’s you, you’re not alone.
We often come across sums insured that haven’t been re-evaluated in years. That’s a worry, because building costs have climbed sharply since 2020. According to Master Builders Australia, non-residential buildings are now nearly 40% more expensive to build than before the pandemic. On top of that, many business owners don’t think to budget for demolition, debris removal or professional fees, which may or may not be included in your sum insured depending on your policy wording.
Underinsurance is an obvious problem if your building is completely destroyed. What many business owners don’t realise is that it also really hurts on a partial loss. Most commercial policies have an average (or co-insurance) clause: if your property is underinsured and you have a partial loss, the insurer will only pay a proportion of your claim.
Take a building insured for $980,000 that would actually cost $1.7 million to rebuild. It’s insured for about 57% of its true value: a $500,000 fire claim would then only pay out roughly $285,000. The owner is left to find $215,000.
What to do: Get a professional reinstatement valuation every few years, and check your sums insured at every renewal. Check whether you need to include car parks, outbuildings, landscaping, demolition and professional fees. Allow for inflation too, because rebuilds often take 12 to 24 months.
Tempted to insure for less because you’d never rebuild to the same specs anyway? Read our breakdown of reinstatement vs indemnity value to see why that can cost you far more than you save in premium.
Trap 2: Assuming your contents are covered off-site (general property cover)
Most business owners know their premises are insured. What they often don’t realise is that their business contents cover generally only applies at the address listed on the policy. Once your gear leaves the building, it may not be covered at all.
Think about everything that regularly leaves your premises: the tradie’s tools in the back of the ute, the laptop that goes home every night, the camera gear taken to a client shoot, the stall equipment packed up for a weekend market. Picture a ute broken into overnight and $15,000 worth of tools gone. Without the right cover, that’s a cost the business wears, on top of the jobs lost while you replace them.
General property cover is designed for exactly this. It covers specified or unspecified items for loss, theft or damage away from your premises, anywhere in Australia or even worldwide, depending on the policy.
What to do: List what regularly leaves your premises and what it would cost to replace. Ask your broker whether it’s covered off-site, and check the conditions and item value limits.
Trap 3: Business interruption insurance that runs out before you reopen
Your building and equipment can be fully covered and you can still go broke waiting to reopen. Business interruption cover pays for lost profit while you get back on your feet, but only for the indemnity period you chose.
If parts, materials or specialist equipment take longer to arrive, repairs take longer too. A 12-month indemnity period can look generous until the builder’s waiting on imported components.
It’s also important to factor in the time it can take to regain your customers and return to pre-loss revenues after a significant interruption to your business.
What to do: Check your indemnity period and your gross profit or revenue figure against realistic repair times, not best-case ones.
Trap 4: Assuming your other policies cover management liability claims
Most claims against business owners and managers don’t come from deliberate wrongdoing. They come from simply doing the job; and they’re a real possibility these days, however good your intentions. Unfair dismissal claims, bullying allegations, WorkSafe investigations and ATO audits are all more common than you’d think.
Responding to them can be very expensive. Legal fees and defence costs can run high even when you’ve done nothing wrong. Public liability and professional indemnity aren’t designed to respond to these kinds of allegations. Without management liability cover, those costs fall on the business or on you personally, and that can seriously affect your ability to keep trading.
What to do: Ask whether you have management liability cover, and whether it protects your directors and managers personally. More on management liability for SMEs.
Trap 5: Skipping cyber insurance because "we're too small to be hacked"
Small businesses are often targeted precisely because their security is weaker. One convincing phishing email, one click on an attachment, and your files are encrypted with a ransom demand on the screen.
Your standard business pack generally won’t cover the lost revenue, data recovery, regulator investigations or third-party claims that follow.
What to do: Turn on automatic updates, back up your data and use multi-factor authentication. And talk to us about cyber insurance, because the best defences still fail sometimes.
Trap 6: Cutting your business insurance when cash gets tight
Running a business means juggling a long list of expenses: wages, stock, rent, equipment, tax. Insurance is usually invoiced once a year, often several policies at a time, and a large lump-sum bill can take a real bite out of your cash flow. When cash is tight, it’s tempting to trim your sums insured or drop a policy altogether to bring that bill down.
We understand the temptation, but it can leave you underinsured at exactly the moment you can least afford a loss. Often there’s a better option: premium funding. A funder pays your insurers upfront, and you repay it in weekly, fortnightly, monthly or quarterly instalments, often with several policies rolled into one payment. It’s a form of borrowing, so there is interest to weigh up against the value of keeping working capital in the business.
Noodledoof Brewery & Distillery in Koroit is a good example. Paying their insurance invoice up front tied up cash needed for staff, supplies and the quieter months. Our broker Corey suggested premium funding at renewal, and owner Alex says they no longer scramble when renewal comes around. It wasn’t something they’d have thought to ask about.
What to do: Before you cut cover, talk to your broker. Ask them to review your whole program so you know which covers really matter, and whether premium funding could smooth out your cash flow.
Trap 7: Not telling your broker what's changed
Significant staffing changes. A second site. A new header or a fleet upgrade. Staff working from home. New technology, or a new product or service. Every change shifts your risk, and a policy set up three years ago assumes the business you had three years ago.
Some changes create gaps. Others mean you’re paying for cover you no longer need.
What to do: Review your insurance every year, and any time the business changes in a meaningful way. Here’s what a review covers.
How a Warrnambool insurance broker can help
None of these traps comes from carelessness. They come from being busy, and from treating insurance as a one-off purchase instead of something that has to keep up with your business.
The fix is simple, and it’s much cheaper before a claim than after. Once a year, ask one question: is this cover still doing the job I need it to do?
If you’re not sure, that’s what we’re here for. As a local Warrnambool insurance broker, Breakwater Insurance Brokers works with small businesses, farms and commercial property owners across Warrnambool and South West Victoria. Call us on 03 5562 0248 or get in touch for a no-fuss review of your business insurance.
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