Are you underinsured?
Research recently carried out by a supplier of buildings reinstatement cost assessments, found that a staggering 77% of properties are underinsured, leaving owners to the risk of being left out of pocket after a loss.
If it is discovered that you are underinsured, innocently or deliberately, your insurers may apply a condition of ‘average’ (unless there is an average exclusion on the policy).
For example:
“The reinstatement value of your property is £200,000, however, you think the value is £100,000 and you insure for this amount. A fire then breaks out, an assessor surveys the property and values the reinstatement cost at £200,000. The insurers will then compare the sum insured against the valuation and note that it is underinsured by 50%, the insurers may then use ‘average’ and only pay 50% of the policy sum insured, being £50,000, therefore leaving you £150,000 short”.
To avoid such circumstances the ABI have created a calculator to help you work out the reinstatement value of your property. Click here to vist the site.
Underinsured does not only relate to the value of property, it is also something to be taken into consideration in respect of Business Interruption Indemnity Periods.
Are you 100% certain that your indemnity period is adequate?
Are you 100% sure that your business will be up and running within your insured period?
Typical indemnity periods are 12, 24, and 36 months, but are these periods long enough? Has your current insurance provider discussed this important matter with you?
The period represents the time it takes you to get back in the position as if the event never happened. It covers the costs of relocation, hire of staff and equipment and much more. However, it will only pay for the duration of the indemnity period.
In such circumstances where the indemnity period is too short, for example, you may only recover 90% of your losses leaving the remaining 10% to be funded by your profits which you would normally invest in the continuing growth of the business, if this investment is not available future issues could arise.
At Woodward Markwell suggest consideration of the following important factors in relation to your indemnity period:
- Realistic re-build times – consider;
- Possible delays
- Weather
- Economic Downturn
- Seasonality
- Machinery Replacement
- Time to manufacture replacement machinery
- Planning Regulations – consider;
- Changes in planning regulations since original construction
- Planners time constraints
- Is the disaster unique/local/national
- This will effect the availability of contractors & suppliers
- Investigation times in the event of a crime
If you would like to discuss this further please contact:
Jennifer Baker on 01473 408416 or bakerj@wmibl.co.uk for Personal Insurances or
David McGowan on 01473 408428 or mcgowand@wmibl.co.uk for Business Insurances.
