Most people only recognise the true value of their commercial insurance policy if they are ever unfortunate enough to have to make a claim. But, the fact of the matter is, your policy is there to give you peace of mind and mitigate your risks so it should always reflect the current state of your operation, especially if your business goes through any changes.
Whether it’s investment in property, plant or machinery, or whether your potential for earnings changes, it’s incredibly important to regularly review the cover you have in place.
Ageas recently published two interesting case studies which really display the potential pitfalls of under-insurance for business.
- A building valuation of a hotel where the sum insured was set at less than £2m when the true rebuilding cost was found to be over £4m, with a timescale for the rebuild (including site clearance and planning) estimated to take over two years. The existing Maximum Indemnity Period for business interruption was only 12 months.
- A claim brought to light a business with a £3m turnover with only a £50,000 loss of revenue sum insured. On investigation the insured had £50,000 as a figure because this is the most he thought he could possibly lose, rather than choosing the true annual amount.
It is important to regularly assess your potential exposure to ensure that your insurance cover is relevant to the current position of your business.
What is the current rebuilding value of your building (not the market value). These are best carried out every three years using professionals to ascertain costs and you should also factor in business interruptions and additional costs to keep you trading.
Machinery and Plant
Create and maintain a register of all current machinery, plant and contents and make sure your assets are adequately covered. Because insurance policies are usually based on a ‘new for old’ basis, your sum insured must reflect any changing plant and equipment.
Loss of earnings could seriously damage your ability to maintain your business in the wake of a crisis. Ensuring the sum insured you have in place and the length of time your cover is required needs to reflect the time the business will need to fully recover. This needs to include any growth plans, ensuring current payroll and turnover estimates are up to date.
At Finch, our team remain in constant dialogue with customers to ensure that as their business develops, so does the insurance cover that underpins it, and we insist in a minimum of one reassessment of their operations each year. Why not get in touch with us today to discover how we work with you?