There are many different types of business insurance policies. Many include cover for physical property, such as business contents, computers or stock. Where these items are included, there is usually a requirement to meet certain security standards.
One principle of insurance, is that the policyholder must act as if uninsured. What this means is that you must take reasonable precautions to prevent any losses. An extreme example is leaving your car parked, unlocked and with the keys still in it. It would be unreasonable to expect an insurer to pay out for a theft claim. Insurance is supposed to cover sudden and unforeseen events. Having your car stolen, in the example is not an unforeseen event.
The same applies to business insurance policies. If you left your workshop for the weekend, with the doors open, it would be unlikely that insurers would pay for a theft claim.
Business insurance minimum security requirements outline the level of physical intruder protection, to be in place, whenever the business is closed. This is to reduce the likelihood of paying out on a theft claim. These are usually fairly standard and most businesses will already have these in place.
Most insurers minimum requirements are very similar. However, it is very important that you check that you comply with these. When you are looking for a business insurance quote, you will be asked about your current levels of security. If you receive your quote from an business insurance broker, they are obliged to confirm this in writing to you. Within the quote, any minimum security requirements will be specified. This is when you should read through the security requirements, before the cover is taken out.
If you do not comply with the security and this causes a loss, it may result in your claim not being paid.
Not complying with the security needs to directly result in a loss, for an insurer to refuse to pay out on a claim. An example would be a manufacturing company with a large building. If there’s a break in, through the main door, and all specified security was in force, a valid claim would be paid. If the insurers noticed that a single window, at the other end of the building, did not have a suitable window lock, this would not affect the claim. Strictly, the security has not been complied with. However, it would be unreasonable for the insurer to refuse to pay for the claim, following the break in through the door. The window without the lock had nothing to do with the break in, and shouldn’t affect the insurers consideration of the claim.
This is not to say that an insurer would not try to take this approach. However, it is highly unlikely they would be able to refuse to pay. If there needed to be a certain type of lock on the door and this was not the case, it would be an issue. If the lock was inferior, and this meant the break in occurred, insurers would consider whether to pay out on the claim. Not every insurer will take this approach. A reasonable insurer will consider all of the factors. They may still consider, and pay out on, the claim. But you do need to be aware that non-compliance may cause an issue.
If you are unsure what security you must comply with, please speak to your business insurance broker. They can provide advice and send you a document to clarify what this is.