Even though you may not be aware of it, your organisation may be guilty of making this common—yet costly—mistake.
According to research from the Chartered Institute of Loss Adjusters, 43 per cent of business interruption policies were underinsured by an average of 53 per cent. Underinsurance occurs when a business has insufficient cover to meet its needs, whether that means its assets are valued and insured at less than their true value, its limit of indemnity is too low or its maximum indemnity period is too short.
Unfortunately, it is easy for your business to be underinsured if you do not plan for the worst—even if you believe it cannot happen to your business. To ensure that your organisation has the proper amount of cover, take the following precautions:
- Review your business interruption policy at least annually to ensure that all your information is up to date.
- Provide the cost of rebuilding the property (including the costs of demolition, materials and professional fees) to your broker rather than the market value or the amount you purchased it for.
- Calculate and use your actual total revenue.
- Conduct regular, accurate valuations of your business and property.
- Determine an appropriate indemnity period that allows your business enough time to recover.
- Review your policy wording to ensure that you have the broadest cover possible.
- Increase your sum insured to reflect inflation.
The British Insurance Brokers' Association (BIBA) has published information about avoiding underinsurance which you may find useful.
If you need more information about how you can protect your organisation from underinsurance, contact the insurance professionals at Bollington today.