Avoiding Under-Insurance

Few businesses give their insurance a second thought, until they must claim. And for many businesses this leads to a terrible sinking feeling when they are told that they were under-insured, because of information that was not updated correctly. It is extremely important to make sure your company is sufficiently and correctly insured.

Insurance premiums are based on the risk value they are insuring, which is based on information the insurer provides. As your company grows, your risks grow as well. If you do not update your risk profile and you need to claim, you will only be paid out the amount that your company initially insured. Which means you won’t receive enough money to restore your business to its pre-claim condition and for a small business with leased or hired equipment, you may even find yourself paying out for equipment you don’t have.

How to Avoid Under- Insurance

  • It is always a good idea to use a professional/ broker to assist you with your assessment process. Regular valuations of your risks will make sure that you are always fully covered.
  • Be sure to choose a disaster recovery or continuity policy, this will ensure that you will be able to recover any losses suffered.
  • When insuring your building structure, always insure the building on how much it will cost the business to rebuild the structure and not market value as certain features of your premises might affect the cost to reconstruct the building after a disaster.
  • When insuring for business interruptions, it is advisable to buy declaration-linked insurance, as it provides an uplift of 33% (should the sum insured and surety be inaccurate)
  • When buying business interruption insurance, it is advisable to remember that accountancy and insurance policy definitions of annual gross profits are different. Be sure to check that your gross profit matches your policy.
  • Always check your documentation. Check that all the information is correct and that no errors have slipped through the cracks.
  • Assess the current risks of your company and the risks that might appear in the future (e.g. data protection or cyber risk)
  • The cost of the professionals assisting with your claims like accountants are often not included in your insurance covers and often build hefty bills which places extra stress on the situation that small/ medium companies most of the time can’t afford. Be sure to discuss these costs with your broker and if you need additional cover for your business.
  • Insurance is a very important component of your company and many companies assume that they are fully covered for loss or damage to the property, employees that are injured and injury or damage to a third-party caused by your business or yourself.

 

A full guide from BIBA on avoiding under insurance can be viewed here.