Ever told your broker your building isn’t worth that much with the intention of achieving a lower premium? If your answer is yes, you could be placing the future of your business in jeopardy.
While none of us like to pay more for insurance, the simple fact is that in the event of a fire, flood or other major loss, underinsurance can be incredibly costly with insurers penalising policy holders by the percentage they are
At Claims Management Group (CMG), time and time again we see the devastating effect underinsurance has on a business financially, with some business owners unable to reopen their doors due to the financial impact.
Our goal as insurance specialists is to help you understand what the insurance premium you are paying for covers, so that in the event of a loss, you can have peace of mind that your business can weather the financial impact.
The high cost of under insurance
As if a major loss isn’t traumatic enough, if you need to make a claim and are under-insured, your insurer will offer you a reduced settlement. Often policies include an ‘Average Clause’ which means the insurer can reduce its liability for a claim by applying for a proportionate settlement.
For example, a building with a complete reinstatement cost of €1,000,000 which you insured for €600,000 will be 40% underinsured. Regardless of the extent of damage to the building the ‘Average Clause’ is applied by the insurer.
It is important to consider that if the entire building is destroyed, only €600,000 will be paid-but this is still only 60% of the replacement cost.
Deciding how much insurance is enough So, how much should you be insured for?
The first thing to remember is the sum you insure must be based on the Reinstatement Value, NOT the Market Value. The rapid increase in building costs, particularly over the last six months, means that many businesses are now faced with inadequate cover, leaving them vulnerable if they need to make a claim.
As a business owner, the onus is on you – not your insurer or your broker – to ensure your sums insured are sufficient. That’s why it is so important to review your policy terms thoroughly each year and undertake an accurate business valuation assessment. Estimates are not acceptable because they are based on generalisations.
A Value at Risk assessment will determine the true value of your business and its reinstatement value. CMG’s team of insurance specialists have been carrying out Value at Risk assessments for many years and will meet with your management team to undertake an onsite inspection and a complete analysis of your business.
A formal business valuation provides multiple facts and figures regarding the actual worth or value of the business in terms of market competition, asset values and income values.
Once surveyed and recorded, the value at risk is defined by but not limited to policy cover for buildings, contents, plant and machinery, fixtures and fittings, stock, computers, business interruption and additional costs of working.
There are many benefits to having correct insurance cover
Sufficient cover for your business gives you peace of mind that in the event of a claim, you can expect the full pay out from your insurance company (with no average adjustment).
It also means you will pay the correct premium with potential savings, and benefit from a current and accurate Value at Risk valuation.
You can also rely on a cost-effective and efficient claims process which will help your business get back on its feet faster.
50% off Value at Risk reports for HAI members
CMG is offering 50% off Value at Risk reports for members of Hardware Association Ireland until the end of May 2022. For further information please contact them at claimmanagementgroup.com or phone 0818 118 118 / 028 8224 9015.