It is estimated around 80% of businesses in the UK are underinsured 1. This occurs when your current insurance cover does not cover your needs entirely, and ultimately, will not fully cover your costs in the need to make a claim. If you are underinsured, your insurer may apply the “Average” condition, where the claim amount is adjusted in proportion to the extent of underinsurance. For example, if the sum insured is 25% lower than the total value at risk, the claim payout will also be reduced by 25%. This shortfall can leave businesses vulnerable to financial losses in the event of unexpected incidents.
To ensure that your business is adequately protected, it's important to regularly review and adjust your insurance cover to meet changing needs and risks. Here are five practical tips to help mitigate the risk of underinsurance and enhance your cover:
1. Conduct regular policy reviews
Consult with a specialist industry-specific broker to review your insurance policy at least annually, or whenever significant changes occur. This ensures that your coverage aligns with the evolving value of assets, business operations, and potential risks.
2. Obtain professional appraisals and valuations
Get updated appraisals for your property, equipment, and assets to ensure the replacement costs are accurate. This allows your broker to adjust coverage limits accordingly, providing the most appropriate protection.
3. Maintain detailed documentation
Keep thorough records of your assets by maintaining a detailed asset register/inventory and record purchases utilising cloud accounting software.
4. Conduct regular risk assessments
Work with insurance experts to assess risks specific to your business and industry. Identifying potential liabilities and risks will help you adjust your coverage to meet your specific needs.
5. Review and enhance coverage options
Speak to your insurance broker to familiarise yourself with the various cover types available, such as Business Interruption. Consider adding endorsements to your policy to cover specialist risks or to increase cover limits, ensuring comprehensive protection.
Helping you prevent underinsurance
Don't wait until it's too late, contact our team today to ensure your business is appropriately protected from the risks of underinsurance. Our specialist team are here to help you assess your needs and tailor the right coverage for your business.