Franchises and Insurance

We’ve put together some FAQs when it comes to Franchisee’s and their insurance requirements:

Who should organise the insurance, the franchisee or the franchisor?

Ultimately it is the individual franchisees responsibility to organise their insurances, but in a lot of situations the franchisors, through their recommended supplier, have facilitated a group program which will include cover for the individual franchisee.  The benefits of a group program can include discounted premiums and improved cover which can be extremely valuable in hard to place niche industries.

It is not compulsory for franchisees to use the franchisors preferred supplier for their insurance needs, but it is important that the franchisee meets the required level of insurance to satisfy their compliance.

How do I go about organising insurance for my business?

There are generally two ways that insurance can be obtained for a business, this can be done by either approaching an insurer directly, or by engaging a third party facilitator such as a broker, agent, bank, building society or finance company.  Regardless of the method you use, it is important to understand the insurance coverage available to your business, and that you make a well informed decision based on the relevant coverage available.

How much will this cost?

To many businesses, the insurance cost is something they could do without, especially when money is tight as in the initial startup phase. It is extremely important that the correct cover is obtained as the extra dollars spent could be the difference between a business surviving or not should an unforeseen loss occur.

It is important that the correct sums insured are outlined on the policies as most policies contain what is known as an Average or Co-Insurance clause. In cases where you are underinsured, i.e. not insured to the full value or the amount of insurance limit purchased is inadequate, your claim may be reduced in proportion to the amount of the under-insurance.

What kinds of insurance do I need to consider?

As a general rule some of the types of insurance cover that franchises should be looking at for a tenancy based business include;

  1. Public and product liability
  2. Workers compensation
  3. Fire and perils: covers machinery, plant, fixtures and fittings, stock
  4. Business interruption
  5. Money cover – on premises/at home, and to/from the bank
  6. Glass – breakage of internal (showcases, counters for instance) and external
  7. Machinery breakdown
  8. Deterioration of stock
  9. Burglary
  10. Goods in transit

Why should I use a broker?

Due to the range of cover available to businesses and the uniqueness of different franchises it adds extra weight to having an insurance professional assist in the placement of an insurance program.

As most insurance policy contracts are generally similar in nature it is important to look at various factors when deciding on which insurer to go with. Clearly in most instances price is a big factor but you should take advice from your broker or intermediary on why they have recommended the insurers they have. Find out information on the insurers ability to pay claims and the relationship the intermediary has with those insurers such as the amount of business they have placed with them. In some instances whether the insurer is a local insurer or overseas based can be a factor in the case of a large loss.

Unfortunately the importance of insurance is not fully comprehended until a loss occurs, at which stage sometimes it’s too late.  By utilising a broker you have the ability to canvas the market for the most suitable insurer for your business. Other than competitive premiums, a brokers worth is definitely highlighted during a claimable situation. The relationship between insurer and broker can sometimes mean the difference between a claim being paid or not and the time it takes to receive a claim payout.

DISCLAIMER

Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.  The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.