Tackling the issue of underinsurance

AT&A Insurance Brokers

The impact of underinsurance can be crippling for any business that suffers a loss, but it often hits SMEs particularly hard.

I thought I would share what can be done to help SMEs tackle the problem.

There are many myths and misconceptions that exist around the issue, and these need to be demystified in order to help SMEs bridge the knowledge gap and avoid the danger.

What’s it worth? What can businesses do to ensure that their ‘sums insured’ is as close to the reality as possible so that everything’s covered?

Here are some tips: Ignore the ‘market value’of a building.

Base insurance cover on how much it would cost to rebuild the property and re-purchase stock and equipment.

Don’t forget that a listed building will probably be more costly and time-consuming to repair/rebuild than others and, in many cases, delays can be driven by obtaining appropriate planning consents.

Remember to consider the cost of property kept outside the main structure(s), including vehicles, items in external storage and gates and fences and other security installations (eg cameras).

Keep the value of property and possessions front of mind constantly. When new equipment is purchased, even if it’s replacing older models that are being removed, it’s important the relevant insurance policy is revisited to check that the cover is still appropriate for the increased value of contents.

Don’t forget that the value of some items, like precious metals and stones, might actually increase after purchase.

If an SME puts off the task of valuation, it might not be until an unfortunate situation happens where a claim needs to be made that the truth comes out that the property is underinsured and the payout won’t match up to what they need.

Check policy exclusions,definitions and limitations Some scenarios resulting in material losses may unsuspectingly be left completely uninsured because of clauses or specific exclusions within an insurance policy.

For example, there might be confusion about who is responsible for, and whose policy applies, when hired or contractor’s equipment is on the premises.

Instead of waiting for the need to claim to arise, think about it during the quotation process and always discuss it and make necessary arrangements with the contractor or hire company.

For any help with any of these points, please call Mari Horsfall at AT&A Insurance Brokers on 0121 227 4212