The Threat of Underinsurance

Many UK businesses risk their own survival by remaining underinsured.

This 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, underinsurance is a widespread and persistent problem, and a disaster can strike at any moment, leaving businesses—like yours—vulnerable to complete destruction.

Businesses can be underinsured for many reasons. Often it is because business owners think that a major loss event will never happen to them, so they do not need comprehensive protection. Yet, inclement weather, a cyber-security hack or a fire can destroy any business.

To discover whether your business may be underinsured, consider the three most common areas of underinsurance:

  1. Property: According to the Building Cost Information Service, up to 80 per cent of the United Kingdom’s commercial properties are thought to be underinsured. Business owners often only consider market value rather than reinstatement and replacement costs for material damage. Failing to regularly reassess the value of your property and adjust your policy could lead you to being underinsured.
  2. Business interruption: The inability to maintain business operations in the wake of crisis can be devastating. Possessing a current continuity plan to cover a crisis is essential. To ensure that your cover is adequate, check that all your costs are included in your sums insured as well as a sufficient indemnity period.
  3. Liability: One of the most common causes is that business owners forget that a single incident can often involve multiple claimants. Ensure you are covered for every liability scenario.