Are you underinsured?

If you have never used a professional valuation service, or your insurance has not been reviewed in a long time, then there is a good chance that you are underinsured. The good news is that the insurance experts at C&M are here to help, by offering you a free insurance review of any business protection you currently have in place. There is no obligation to take out an insurance policy through us, but you could be alerted to certain areas of your insurance policy that are in need of greater protection.

Specialist valuers Barret Corp & Harrington say that 77% of the properties they go out to are underinsured by 45%. This is easily done, and there are a number of reasons this could be the case, creating a trap for businesses to fall into:

1. The building is listed – Specialist services and materials have not been factored into the cost

2. Professional service fees – Surveyors, architects and other professionals may need to be consulted in the case of a loss,  but these costs have not been included in the sums insured

3. Market value vs. rebuild cost – A common error by which the policy holder bases their buildings insurance on the market value of the property, rather than how much it would cost to rebuild it

4. Updated equipment – Any new plant added to your company assets needs to be noted on your insurance, otherwise the value of your contents could be going up, while on paper it remains the same

5. Extensions – Any extensions will add to the rebuild cost of the property

6.  VAT – By not accounting for a further 20% on top of costs, you are lining yourself for financial difficulties in the event of a claim.

These simple errors could lead to big costs. If the figures from Barret Corp & Harrington are anything to go by, then these businesses, upon suffering a loss, could only be entitled to just over half the settlement they would otherwise expect had they been insured to the full amount.

Average clause

These calculations on the insurers part all come down to something known as “average clause.” It means that if, for example, a business premises is irreparably damaged, and needs rebuilding, but the rebuild costs have been grossly underestimated, say by 50%, then they are going to be 50% short of what they actually need to rebuild the business.