Sharon Kenny – Head of Marketing at Australia’s number one online business insurance service, BizCover – explains the hidden danger of underinsurance for beauty professionals.
This article was produced in partnership with BizCover.
There’s no denying that the pressure of inflation and the cost-of-living crisis are impacting everyone. As a professional in the beauty industry, you may be tempted to cut costs by reducing your insurance premiums. However, this could end up costing you much more in the long run.
What is underinsurance?
Trying to cut costs on insurance policies means you could end up being underinsured. Underinsurance occurs when an insurance policy does not cover the full value of potential liabilities or the cost of replacing your assets.
For a beauty professional, this could translate to costly claims arising from professional errors when providing treatment to a client, experiencing physical damage to stock and business premises, or unexpected out-of-pocket expense due to legal disputes.
The consequences of underinsurance can be quite serious, significantly impacting your finances as well as damaging your reputation.
What is an underinsurance clause?
An underinsurance clause is part of an insurance policy that comes into play if the insured amount is less than the amount needed to fully cover a loss.
Put simply, if you insure something, like your contents or stock, for less than its full value, then the underinsurance clause means that the insurance company may only pay a portion of your claim – even if the damage or loss is within the cover limit.
A real-world underinsurance claims story
Something as mundane as a defective water valve could spell disaster for a small business.
This is exactly what happened to a salon when the hot water tank valve failed to shut off, resulting in the salon being flooded and the premises severely damaged.
The salon owner, who was renting the premises, lodged a claim against their Business Insurance Pack policy. This policy included Contents cover for the total amount of $20,000.
However, a loss adjustor was engaged by the insurer to assess the situation and discovered a discrepancy in the insured amount declared. The loss adjustor assessed the total value of the contents was more than $40,000 – much higher than the insured amount. This meant that, because the actual value of the contents was higher than the insured amount, the underinsurance clause in the salon owner’s policy was triggered.
In the end, the damage to the salon owner’s premises (which, being rented, were covered under Contents insurance) and the scope of work needed to repair the building amounted to almost $8,000. The insurer paid a total amount of $4,354 for rectification works, a figure that was calculated based on the underinsurance clause. This meant that the salon owner was out of pocket for nearly half of the repairs needed.
3 simple steps to check if you’re underinsured
It’s important to regularly review your policies, especially if your circumstances have changed. This ensures that you have declared the correct value of your contents and stock and have the correct level of cover, so you won’t be caught off guard if you need to make a claim.
To check whether you’re underinsured, follow these simple steps:
- Conduct a risk assessment, identifying all potential risks and liabilities that are specific to your beauty business.
- Update your property and asset values. You should aim to do this at least on an annual basis. If you’ve purchased new equipment or moved to a different premises, then the value of your property and contents may have changed.
- Finally, review your insurance policies. Evaluate your cover limits and compare them against the potential costs of the risks you’ve identified. You should always make sure that you read the policy details carefully to understand what is and isn’t covered.
BizCover is here to help
It’s always a good feeling when you can find a new way to save money – especially during the rising cost-of-living crisis. But when cutting costs, it’s important to make sure that you’re not inadvertently putting yourself at a disadvantage.
Reviewing and buying insurance is part and parcel of doing business as a beauty professional. But that doesn’t mean it has to be difficult.
BizCover is here to help. You can compare multiple policies online in moments, allowing you to find the right policy that suits your needs and budget.
For on the go cover, go BizCover. Visit us online at BizCover.com.au or call us on 1300 805 821.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover. © 2025 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769
Read the current issue of our digital magazine here:
- For more news and updates, subscribe to our weekly newsletter
- Follow us on Instagram
- Like us on Facebook
- Join Australia’s largest network of beauty industry professionals on LinkedIn
- Subscribe to our print magazine
Have an idea for a story or want to see a topic covered on our site and in our pages? Get in touch at info@professionalbeauty.com.au.