As a business owner you can follow a few simple steps to help reduce the possibility of being underinsured.

1. Get up to date valuations

Many organisations incorrectly value their property for a variety of reasons. This can include

failing to conduct regular reviews of sums insured, not increasing property values after alterations or extensions, misunderstanding the difference between rebuild and market values and neglecting to include costs for car parks, gates and landscaping. Whilst most insurers will index link sums insured at their brokers request, it is important to review these on a regular basis and it is prudent to employ the services of a qualified surveyor.

2. Keep track of stock values

For most businesses the value of your stock will vary throughout the year, this could be reflective of seasons, stockpiling for Brexit, or preparing for a large contract. It’s important that you consider this when declaring your stock sums insured. It is plausible that your insurance policy caters for these increases by extension, but if you have any concerns or it isn’t clear you should you should discuss with your broker.

3. Check your Business interruption insurance

Business interruption insurance is a key piece of cover for most businesses, however it’s also one of the most common sources of underinsurance. Firstly, you must ensure that the cover is written on the correct basis (The majority of policies are written on a gross profit basis) Secondly, it is imperative that the calculation is correct. Remember, an accountants version of gross profit will subtract costs that that vary in production: but for insurance purposes they must vary in direct proportion.

Discuss the indemnity period with your broker, 75% of business interruption policies have an indemnity period of 12 months or less1, however extending this period may be more suitable. Your broker will also be able to provide information on any suitable extensions available.

4. Review your insurance arrangements

Many businesses renew their insurance year after year without review. You should start the renewal process in good time and raise any concerns that you may have with your broker. It is much better to discuss any potential issues prior to a claim than to deal with the consequences of underinsurance afterwards.


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