ARE YOU RISKING FINANCIAL RUIN BY BUYING INSURANCE ONLINE?

When it comes to buying insurance, you have two choices: buy it online or organise it through a broker. There is much choice available online, however without the right advice; you could be buying the wrong insurance.  At best, it might be a waste of money.  At worst, you can be significantly out of pocket when it comes time to make a claim.
 
WHAT CAN GO WRONG – ANDY’S STORY:
Andy* is a new migrant in Australia.  He purchased a convenience store in the eastern suburbs of Melbourne.  Although he has decades of business experience in China, it is his first time running his own business.  Andy took a long time in comparing different business insurance policies online, and he felt confident in the choice that he made.
 
In July, heavy rain caused significant water damage to the store’s floor.   His landlord refused to do anything to help him.  Andy wasn’t able open the convenience store for 3 weeks whilst he arranged for the floor to be made safe and then fixed.  Andy called his insurance company, and it felt to him like he could never reach a person to speak to about his insurance claim, and he spent a lot of time on hold. 
 
It turned out Andy didn’t insure for loss of business income, which meant that he had to continue paying rent and salaries although he had no income from sales.  Insurance could have helped him cover some of these losses but Andy wasn’t aware that he could purchase this type of insurance. 
 
He eventually got the insurance company to pay for the repairs to the floor, but it took almost four months to finally receive his money, and it didn’t even cover half of the repair costs because the insurance company said that his repairer was too expensive.  Andy was incredibly stressed from dealing with the insurance company and the repairer while at the same time trying to operate his business. 
 
Two months later, Andy went to a migrants’ community activity.  He made friend with other new migrants who also who operate small businesses.  They, too, had bad luck during the year, and had to make a claim on their insurance policy.  However, they were pleasantly surprised at how easy the experience was.  Poor Andy was shocked!
 
WHAT SHOULD HAVE HAPPENED – MARK’S STORY:
Andy’s friend, Mark*, purchased a business located in a local shopping mall.  Mark’s shop sold cigarettes and magazines.  When he purchased his business, his migration agent recommended that he use an insurance broker.   As Mark was unfamiliar with running a business in Australia, he decided it couldn’t hurt to follow his migration agent’s advice. 
 
Mark spoke to the insurance broker, and they chatted about his business for about twenty minutes.   The insurance broker explained him what could go wrong for his business and told him that there were a lot of burglaries targeting tobacco shops.  He recommended that Mark install a back-to-base alarm system.  Mark hadn’t heard of this type of alarm system before, but he decided to look into it.  They also discussed how much insurance Mark should buy.  The insurance broker told Mark that cigarettes are expensive, and he should insure his stock for more money. 
 
His insurance broker came back to him the next day with several options for insurance, all at different prices.  Mark asked lots of questions about the different between the insurance products, and tried to understand as much as possible about what the insurance was for.  There were many insurance terms that Mark didn’t understand, but his broker was patient in explaining them to him. At the end of the process, Mark felt confident of the choice that he made when buying insurance. 
 
Mark’s shop was also affected by the heavy rains in July. The gutter overflowed, and the water started leaking into the shop.  About $8,000 of Mark’s cigarettes were damaged by the water.  The first thing Mark did was call his insurance broker.  His insurance broker told him straight away not to worry, as the loss would be covered by his insurance.   
 
The next day, a representative from the insurance company came to visit Mark to inspect the damage.  Mark didn’t feel confident in his English, but his insurance broker assured him that he had already explained the whole situation to the insurance company.  The visit went smoothly, and his broker called him the next day to tell Mark that everything was under control.  He told Mark that he could expect his insurance company to pay the claim within the next three weeks. 
 
Mark laughed as he told Andy this story, saying that it was lucky that the insurance broker had done all the hard work for him!
 
DID MARK PAY MORE FOR HIS INSURANCE?
Buying insurance through a broker can be cheaper than buying it online.  This is because brokers have negotiating power with different insurers.  Mark ended up with the best value for money insurance policy, as well as professional advice on risk management.  On top of that, Mark didn’t feel stressed during the claim as he knew his insurance broker was there to look after him. 
 
Don’t gamble on your livelihood.  If cost, convenience, and peace of mind is important to you, it is worth visiting an insurance broker for your home and business insurance. 
 
* Names have been changed