What to Know Before Insuring Your Petrol Station
When it comes to owning a business, ensuring that you are properly insured is a top priority. Failing to do your research before going with an insurance plan can lead to cases of being underinsured, incompletely insured, or paying way too much for your coverage. However, it’s not always easy to understand what you should be looking out for when shopping insurance plans for your petrol station.
For some insight on the subject, we reached out to Chris Yates from Australia’s National Insurance Services (NIS) for some professional advice from an industry expert. From what to know before you choose a policy, to how to avoid paying too much, working with an insurance broker like Chris allows you to feel confident that your service station is properly covered, no matter what life throws your way.
How Often To Review Your Insurance
Because petrol stations vary in size and service, Chris stresses that there is no “one size fits all approach” to managing risks. He advises that petrol station owners review their insurance agreements at least every 6 to 12 months in order to stay ahead of changes, and ensure proper coverage in the event of a claim. Any significant purchases or changes to your service station should be relayed to your broker right away.
Common Gaps in Petrol Station Insurance Policies
Underinsurance is a big problem for many Australian Small businesses. In fact, Chris reports that approximately 80% of small businesses in Australian are underinsured in some regard! So, what are common places of underinsurance when it comes to petrol stations?
According to Chris, the main areas of concern are Gross Profit (Business Interruption), and asset values (building, stock, and contents). Without regular reviews of your insurance policy, your sums insured will more than likely be inadequate when it comes to making a claim. This is largely due to the purchasing of new equipment, new sites, or operations expansion such as adding car washes or mechanical workshops to your service station.
Many insurance policies complicate things further. Chris cites clauses such as the ‘Average’ or ‘Co-Insurance’ clause, also known as the under-insurance clause, which allow claims to be reduced in proportion to the amount of the under-insurance, should you insure for less than the full value of the property.
An example of the ‘average’/ co-insurance’ clause can be shown as follows:
How much you should have insured for = $1,000,000
How much you have insured for = $500,000
This means you are self-insured for only 50% of the full value.
You have an insurance claim for damages worth $100,000
The amount payable by the insurer as a result of the application of the ‘Average’/’Co-Insurance’ clause (ie. 50%) = $50,000.
If 80% of Australian small businesses, including petrol stations, are indeed insured, then this situation is likely exceedingly common. Based on the figures above, it pays to review your insurances regularly, and have peace of mind that you are fully covered.
Reasons Petrol Station Owners May Have Higher Premiums
According to Chris, there are a few reasons petrol station owners may find themselves paying higher than normal premiums. The main reason being that premiums are calculated by perceived risk, and petrol stations maintain many potential risk factors. Aspects such as the construction of the site, fire prevention, security measures, risks associated with your petrol station’s location like crime or flooding, size of the operation, claim history, and additional services such as car washes and roadhouses are all factored in. With so much to consider, many service station owners may end up paying more than they expect.
Chris notes that a petrol station that maintains a good claims history, is of relatively new construction, is based near a fire brigade and management would be seen to be demonstrating a proactive approach to protection measures, and will likely benefit from better premiums.
Additionally, owners should keep in mind that the insurance industry is currently going through a ‘hard market’ cycle, where premiums are rising and insurers are at times declining to renew policies if they are not perceived as ‘good risks’. Chris maintains that being proactive and demonstrating good risk management (fire, security and housekeeping) is the best tool in your arsenal to receive favourable rates available now and in the future.
Additional Insurances for Petrol Station Owners
General business insurance is not the only insurance that service station owners should seek to ensure that they are fully covered. We asked Chris what he believes to be essential insurance policies for any proactive petrol station owner. He noted the following policies as must-haves for our members:
- Life Insurance: Life insurance policies guarantee that the insurer pays a sum of money to named beneficiaries when the insured policyholder passes away.
- Key Person Insurance: Key person insurance is similar to life insurance, but for your business. If a key person suffers a major injury, illness, or death, key person insurance can help maintain profitability and cover some losses incurred. This might include the cost of replacing the employee, as well as losses from a decreased ability to do business. Unlike other types of life insurance, key person insurance is paid out to the business instead of an individual. It is usually paid in a lump sum, but in some cases may be paid out monthly to support ongoing loss of revenue.
- Income protection: Income protection insurance insures you against loss of earnings through injury, illness or redundancy. This insurance covers the insured 24 hours a day, 7 days a week and usually up to the age of 65.
- Surety bonds: PetroBonds are an innovative form of surety bonding unique to the petroleum industry. They provide retail and wholesale petroleum suppliers with an alternative form of contractual security to bank guarantees and the like. PetroBonds are provided on an unsecured basis and as such dealers are free to utilise their cash or real estate assets as they see fit. PetroBonds incur no ongoing opportunity costs on working capital.
- Environmental Impairment Liability: Environmental impairment products help to protect against four potential losses arising from a pollution incident. These losses are as follows:
- Clean up costs – this can be the main expense and is the cost of removing contaminants and pollutants. It can also include the clean-up of a third-party site, including a waterway or crown land.
- Costs of mitigation and emergency response.
- Public relations and crisis containment expenses.
- Costs incurred through Environmental Protection Authority (EPA) orders, including costs that the EPA incurs itself.
- Management Liability: Management Liability insurance covers the risks that arise from running your business. These risks include but are not limited to items such as OH&S dramas, unfair dismissals, sexual harassment cases, defamation, and more.
Why You Should Use an Insurance Broker
With extensive experience in the insurance industry, Chris has seen first hand the benefits of conducting insurance business through an insurance broker such as himself, rather than dealing directly with insurers. Hiring Chris, or another insurance broker, means that you have an individual on your team who is working for YOU, and not for the insurer.
There is an unfortunate misconception that insurance brokers are more costly than dealing directly with insurers. This is untrue. Insurance brokers are able to negotiate terms on your behalf with their years of expertise and industry relationships. They have access to a wider range of insurers, and have access to some insurers who will only work with brokers, and do not deal directly with customers. Thus, with a broker you are afforded a wider variety of options, and more opportunity for better rates, and better coverage.
If you’re looking for someone to help you assess and manage your risks, provide advice on insurance solutions, help you to arrange, acquire, and maintain insurance, and act as your direct advocate in claim settlements, reach out to an insurance broker before settling on your next policy. With years of experience, Chris Yates is a leading expert in the insurance field ready to help our members maximize and streamline their policies.
Get in contact with Dan Armes at ServoPro to organise your free insurance review on 0490 415 063 or [email protected]