How To Avoid Underinsurance

Gary Harrison, Head of Commercial at Morton Michel, explains more...

When was the last time you reviewed your buildings, contents and business revenue insurance sums insured?

Have you heard the phrase, “what a difference a year makes”? I hear it all the time (granted not in relation to insurance cover) but why is it any different in home life as it is in business?

Underinsurance has a genuine, negative impact on the settlement of claims and your ability to recover as a business affected by significant loss. We are concerned that you will not receive the full benefit of cover available to you had the sums insured been set to an adequate level of protection.

Click here to read a useful guide to help you understand how to think about your sums insured further and the implications of underinsurance. Please also call our specialist team at Morton Michel who will be happy to talk through this in more detail with you.

It is very difficult for insurers to determine what sums insured adequately meet your unique business requirements without your input. You will understand how your business is performing, what investment is being made and how much you spend. We can often help you by explaining how to accurately calculate what level of cover best suits you.

Some useful tips include:

- Think about what investment you have or will be making in this year.

- Have you included the value of donated goods in your contents sums insured? Although you didn’t pay for them, if you suffered a loss, your insurer would need to replace them for you.

- Exclude sales discounts from your valuation. Always insure for the full replacement value of your contents.

- Insure the value of ALL assets, not just what you consider to be at risk.

- Work out the average investment in contents per person within your business or organisation; multiply it to give you an indication of the total value of your contents.

- Have you received any funding? This will need to be included in your revenue calculations.

- How much do you charge per hour, per child in your care? The average hourly rate per child in our 2018 sector survey was £5.01. If you have 30 children in your care, open 8 hours per day, 5 days per week and 48 weeks per year this would suggest an annual revenue of £288k!

- Have you expanded or grown? If you have, no doubt your revenue would have grown too, as would your investment in contents.

- Have you made contingency/disaster recovery plans? What do they tell you about the time it will take for your business or organisation to recover?

The cost of increasing cover is considerably lower than the impact underinsurance will have on a claim. If you are concerned about underinsurance please contact one of our specialist advisors to talk through your options.

Please call our friendly team on 020 8603 0900 to discuss further.

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