Ask most 7-figure business owners if they’re insured, and they’ll say yes. Ask them what their policy actually excludes, and the conversation usually stops. Somewhere between ‘we’ve got insurance’ and ‘we’re actually covered for the things most likely to hurt us’ is a gap that a lot of successful businesses are sitting in without realising it.
‘Self-insurance’ is often just under-insurance with better branding
Plenty of owners rely on cash reserves instead of formal cover — a ‘we’ll just absorb it’ approach. That can be a legitimate, deliberate strategy for smaller, foreseeable risks. It’s a much riskier default when it happens by accident, because nobody ever sat down and worked out what the business is actually exposed to.
The difference between the two is a proper risk assessment — not a product sale.
The insurance gaps we see most often
1. Key person insurance that doesn’t reflect current reality
Cover taken out three or five years ago, based on an org chart and profit level that no longer exists. If the business has grown, added key staff, or become more owner-dependent since the policy was written, the cover amount is very likely stale.
2. Business expenses and income protection treated as an afterthought
If the owner (or another critical person) can’t work for six months, does the policy actually replace enough income to cover fixed business costs and personal living expenses? Many policies are sized around one or the other, not both.
3. Cyber insurance missing entirely, or bundled too thin
Cyber is one of the fastest-growing exposure categories for businesses of this size, and it’s frequently either absent from a general business policy or included with a coverage limit that wouldn’t scratch the surface of a real incident.
4. Policy exclusions nobody has actually read
Every Product Disclosure Statement has exclusions. Few business owners — understandably, given how much else is on their plate — have sat down and read theirs line by line to understand what isn’t covered.
How to actually audit your own gaps
You don’t need to become an insurance expert to run a basic gap check. Start here:
- Pull your current PDS and highlight every exclusion. If a broker can’t explain what’s excluded and why in plain language, that’s a signal worth noting.
- Match cover to your actual risk profile, not a generic template. A logistics business with vehicles and warehouses has a different exposure profile to a professional services firm with client data and no physical stock.
- Recalculate key person and expense cover against this year’s numbers, not the numbers from when the policy was first written.
- Ask specifically about cyber, rather than assuming it’s bundled in. If it is bundled, ask what the sub-limit actually is.
- Find a broker who starts with a risk assessment, not a quote. The right question from a broker is ‘tell me about your business’ before ‘here’s a policy.’
Where insurance fits into the bigger wealth picture
Insurance isn’t really a standalone product decision — it’s the thing that protects everything else you’re building. A business owner working hard on their profit-to-wealth ratio, their investment strategy, and their eventual exit can have all of that undone by a single uninsured event. Getting the gaps closed isn’t exciting, but it’s the foundation the rest of the wealth-building conversation sits on.
FAQ
How do I know if I’m under-insured?
Start with the PDS review above. If your cover amounts haven’t been recalculated in the last 12–24 months, or you can’t clearly state what’s excluded, you’re very likely carrying gaps you don’t know about.
Isn’t keeping cash reserves instead of insurance a valid strategy?
It can be, for smaller and more predictable risks — but it should be a deliberate choice with a clear dollar threshold, not a default because insurance wasn’t reviewed. It also doesn’t scale to catastrophic, low-probability events like a major cyber incident.
What’s the difference between key person insurance and income protection?
Key person insurance protects the business against the financial impact of losing a critical individual. Income protection protects that individual’s personal income if they can’t work. Most businesses need elements of both.
How often should insurance cover be reviewed?
At minimum, annually alongside your other financial reviews, and immediately after any material change — new hires in key roles, revenue growth, new locations, or new types of client data being handled.
Is cyber insurance really necessary for a smaller business?
Business size doesn’t correlate neatly with cyber risk — smaller businesses are frequently targeted precisely because their defences and cover tend to be weaker.
