Underinsurance – Don’t get caught unawares!

Underinsuring your property or business is a bigger deal than you probably think.

Underinsurance occurs when your insurance cover does not fully meet your needs, when you need it. This can create significant challenges for businesses. Having to fund these additional costs can be difficult, particularly at a time when business operations are temporarily paused due to a loss. In severe instances, this could impact the businesses’ ability to continue operations in the future.

Here are a few ways underinsurance can trip you up:

Sum insured slide

Setting the sum insured on a property is difficult and can be markedly below the actual cost of having the building professionally rebuilt.

Indemnity period concerns

Another common error is underestimating how long it will take to reinstate following a catastrophic loss, such as a fire or flood. Rebuilding a property takes time, especially where it’s a more unusual build or planning permission is required.

Supply chain stretch

It’s not just the rising cost of materials that can lead to underinsurance: supply chains are stretching as a result of issues such as geopolitical pressures, additional compliance and trade wars. 

Going direct

Going direct to save a few pennies can be a false economy if it leaves the policyholder seriously exposed when it comes to cover. An experienced broker can help arrange the correct insurance policy.

Regular reviews

Regular reviews are important: without one, even the smallest degree of underinsurance can quickly become a gaping chasm. Look at sums insured every year and factor in any changes to the cost of materials and labour, as well as any issues that might be affecting supply and the length of time it takes to rebuild.

To help maintain accurate sums insured, commercial property policies often include a provision - Day One Uplift - which increases the building’s declared value by a set percentage to take inflation during the policy term into account. 

➡️ If you need support in staying legally compliant and safe, explore our services – we can support your organisation through every issue.