Author: FSB Insurance Service
What Is Underinsurance?
Underinsurance and, in particular, buildings under insurance is becoming a growing problem with statistics provided by RebuildCostASSESSMENT.com, suggesting that a staggering 79% of properties surveyed are underinsured and with the average level of underinsurance being 31%. The total estimated underinsurance of all UK commercial properties is around £325 billion!
Simply put, underinsurance occurs when your sum insured is less than your actual value at risk. In the event of a claim, insurers will apply the condition of average and this could mean that any payment will be reduced proportionately.
Here’s a basic example; Tony owns a building which is insured for £150,000 but, the actual cost to rebuild it is £250,000. So, any claim Tony makes is likely be reduced to 60% of the actual cost. Flood damage could cause £25,000 worth of repairs but, Tony will only be paid £15,000. This leaves him with £10,000 to find out of his own pocket!
How Does Underinsurance Happen?
Underinsurance can occur because of a variety of reasons. Valuations can be out of date; original estimates were not worked out exactly or mistakes were made in their calculation. The most important thing to remember is that values change so, even if you had a professional valuation done when you bought your property a few years ago, it may not be accurate today.
Why Has It Become More Of A Significant Problem?
Recent world events have led to significant supply chain disruption, increased material costs and severe skills shortages, which have in turn resulted in hyper-inflation in the construction industry, raising prices and incurring long delays in getting work done.
How Can You Avoid Underinsurance?
Talk to a qualified FSB insurance advisor to make sure you have the right cover for your business and protect yourself from being exposed should anything go wrong.
Do you need to talk to a professional about your business's insurance? Just fill in the form below to request a call-back and an advisor will reach out to you.
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