5 ways to tackle underinsurance in your property insurance policy
...and why you need to!
The risk of underinsurance for many property owners is growing, even more so now with rapid inflation in the cost of building materials. Reports by Gallagher have found over 40% of commercial properties in the UK are currently underinsured.
So, what is underinsurance?
Underinsurance is when you do not have enough cover for what you need. If your commercial property is underinsured, you may have to cope with a financial loss, reputational damage, or even the risk of business closure.
With the current unstable economy in the UK, it can be difficult to predict or understand how much property insurance cover you need when factoring in cost of materials, inflation, supply chain issues and the skilled workers available to get your business back up and running should the worst happen.
Don’t leave yourself exposed to a substantial shortfall, check out these five ways to tackle property underinsurance.
Get a professional valuation to ensure that your assets have been valued correctly.
This includes providing an accurate ‘rebuild sum insured figure’. The ‘rebuild sum insured’ refers to the cost of rebuilding the property in the event of complete destruction.
It’s important for this figure to be accurate as it tells the insurer the most that they might need to pay-out in the event of a claim.
Daniel Johnson, Key Accounts & Property Existing Business Manager at The Insurance Octopus comments: “After COVID and with the cost-of-living crisis, it is now more important than ever for businesses to be aware of the scale of Underinsurance.
According to the Building Cost Information Service, construction materials currently have an average annual price increase of 20% which is incredibly scary considering most SME`s are unsure when they last had a reinstatement value made. Insurance is there to protect you in times you need it most, so making sure everything is up to date needs to be a priority.”
2. Use a desktop survey
A desktop survey can help give an indication as to what the rebuild cost of a property is and provide accurate valuations.
We can help arrange a survey through one of our partners. Get in touch today if you would like us to do so. Prices start from £156 per property for a survey.
Gallagher reports that 65% of property owners have not reviewed their insurance during the past year, indicating that many could now be at risk. It’s very important you take time to check your property insurance policy.
Conduct a review, ideally yearly, to ensure that your policy reflects your business needs regardless of whether your circumstances change.
This includes any new purchases that may impact your overall rebuild sum insured. Things like new plant and machinery, property alterations and inflated stock levels can impact the level of cover required. Let your insurer know of any changes to your property that may affect your insurance policy.
Look into all the insurance covers that you think could protect your business. 10% of SMEs believe they wouldn’t survive if they had to pay up to £10,000 towards a claim that wasn’t fully covered by insurance. That’s more than half a million businesses paying out of their own pocket if they did not have enough property insurance.
5. Factor in rebuilding costs
Give the cost of rebuilding a property, factoring in all costs instead of market value. This can save you significant financial loss if the bill comes in higher.
Something to bear in mind: The rebuild cost shouldn’t be confused with the market value, as they are usually not the same. The market value can vary depending on external factors and may not consider the complexity of the structure, or the materials needed to rebuild.
Do you have the right level of cover for your property?
Now is the time to review your current insurance cover. With so much economic uncertainty, it’s critical you make sure your risk management plans are firmly in place, which includes having adequate insurance cover.
Get in touch with the team at our sister company The Insurance Octopus to make sure your business insurance needs are met, and you are getting enough cover for your commercial property. We’re available from Monday to Friday, 9am – 5pm.