Underinsurance in the commercial market – what it means for your business
Underinsurance is a phrase often used when talking about home or property insurance – but did you know it applies to business insurance as well?
In simple terms, underinsurance occurs when you’ve not taken out the right amount of insurance cover for your needs. And the impact from being underinsured can be significant in the event of a claim.
For example, if the cost to rebuild or replace your property or contents is £100k but you have taken out insurance that will cover you for £50k, then you would effectively be underinsured by £50k or 50%. Any claim you make will only be paid on the basis of the amount of cover you chose, based on what is called the ‘average clause’ – so in this example your insurer would only cover 50% of any claim, no matter the size of that claim. This would leave you needing to pay the remaining costs yourself which could be anything from hundreds, to thousands, to millions of pounds.
This presentation from Aviva explains more about underinsurance, including a couple of case studies to help provide a greater understanding, along with some key tips on how to recognise that you’re underinsured.
For example, your insurance cover has been based on the market value of the building rather than the rebuild cost, or you are now VAT registered.
To find out more, take a look at Aviva’s presentation – Underinsurance in the commercial market.
If you think you’re at risk from being underinsured, talk to our team of experts.
We’re here to help you put the right insurance arrangements in place to suit your specific business needs. We’re able to carry out a full review and identify gaps in your cover, underinsurance and even being over insured or having duplicate cover where perhaps you’re paying for cover you don’t need.
More in Finance & Insurance
Unipart announces financial results for the year ended 31 December 2023
Unipart delivers strong growth and revenues exceed £1bn
Charles Stanley ...
Established in 1792, Charles Stanley is one of the UK’s leading wealth management firms, with a rich heritage of delivering high quality client service. Although we are more than 200 years old, we are focused on investing in our future, embracing technology and innovation, and adapting to changes in society to help our clients prosper. Operating from more than 20 branches across the UK we provide bespoke investment portfolios and tailored financial advice at every stage of your financial journey.
Your FREE guide to the Spring Budget 2023
Chancellor, Jeremy Hunt’s Budget 2023 revolved around the theme of back-to-work through the extension of free childcare, and the lifting of pension caps.
From this author
Four reasons why you should consider an employee discount scheme
People across the UK are currently facing new financial concerns as the cost of living continues to increase. A recent study revealed that four in ten UK employees listed money as their biggest worry, and 65% of respondents would like more financial support from their employers.
Risk Management is an enabler for growth
It’s a hackneyed phrase that insurance is a necessary evil. That can’t be said about risk management. Actually, effective risk management enables your business to make better decisions, avoid the typical pitfalls and deliver on its plan. Isn’t that how we all want to manage our business? A great analogy is Formula 1. People often think […]
Is your “key person” really who you think it is?
Who is the life and soul of your business? If you can name them, then you probably need key person insurance.