Pictured above: Tim Lee

Reviewing current business insurance cover and managing risk is essential for business survival, says an East Midlands' leading business insurance broker.

Too many company directors trust the face of the advisor without considering the implications of getting their insurance wrong. Price, friendly service and a chat about their golf handicap comes before questions on gaps in cover and practical risk management, according to Tim Lee, managing director of Cornerstone Business Insurance.

"British Industry and commerce is too trusting and fails to probe into the consequences of a contractual misunderstanding. 

"The insurance policy is a classic contract that only operates at the time of a loss. This is the point where the policy warranties and conditions come jumping out to startle clients and create difficulty in claims settlement," continues Lee.

He adds that the claim is the moment of truth. "At this point comes the stark realisation that the cover is inadequate or insurers were too slow to respond. This is not the time to discover there are gaps in the policy or learn about recovery planning."

And he goes on to say that while fires and floods occur, simple measures in risk management can have a massive effect on the survival of the company. 

"Your customers do not hang around whilst the lost adjuster is writing his report, so it's vital you understand the claims process and put a plan into place to help you recover as quickly as possible.

"There's a tendency for business managers to shy away from reviewing policies and even reviewing whether there's enough cover in place; the first action entails a lot of small print and time, and the second could cost more if it's found that cover is inadequate."

Lee recommends an annual 'health check' for insurance policies and not just before renewal. 

"Sixty per cent of the risks a business face are not insurable and therefore it is vital that you understand how to manage these risks. This should be led by your advisor. 

"Don't rely on a friendly chat and cup of tea when agreeing to renew your policy. Let your advisor play devil's advocate and challenge your perception of the cover and the effects of a major loss.

"The insurers will not rebuild your business after a serious loss, so you need to understand the policy limitations and be prepared."