What is underinsurance?
Underinsurance, which occurs when something is insured for less than its replacement value, has become a big problem for businesses in recent years.
According to research by a global risk management firm, over 40% of commercial properties in the UK are currently underinsured. The average shortfall of underinsured properties was an average of 43% against the rebuild value covered by their insurance – and where there’s a gap, businesses are typically left to pay the difference themselves.
If you are underinsured when you come to make a claim, there are two approaches insurers typically take:
- They may choose to void the policy and refund all the premiums you’ve paid rather than pay out for the claim.
- Alternatively, you may receive a reduced claims payment, where the insurer uses an ‘average clause’ to reduce your claim in proportion to the underinsurance. For example, if you insure a build for 70% of the correct value, only 70% of the claim will be paid.
The last thing most businesses want is to have a difficult conversation about how a claim payout might not meet their expectations due to underinsurance, particularly when it involves critical business buildings and assets.
How can we help?
Knowing that you have accurate insurance valuations in place provides peace of mind and could potentially save you huge sums when it comes to making a claim. It also doesn’t necessarily mean your premiums will increase.
At Eddisons, we have a team of property, plant and machinery valuers located across the country who can meet all your insurance valuation needs in an efficient and cost-effective way.
Valuation methods
We provide insurance assessments using the following three methods:
This is the cost to repair, reconstruct or renew assets to a condition equal to but not better than when new.
This is the sum assured for items equivalent to the cost of replacing the items with identical or substantially similar equipment in a condition comparable to the existing asset.
This is the recoverable value where assets are surplus or no longer used.
Our experts can advise you on the most suitable valuation method to fit your requirements.
For further information about our valuation service, please complete the contact form above or below and a member of our insurance valuations team will get back to you immediately.