How businesses can avoid under insurance
Recent research from Aviva, shows that only 1 in 5 small businesses felt that they had the right level of insurance coverage in place. In addition they also audited a number of SME businesses and discovered that they were under insured by an average of £486,000. As you can see if the worst happens, those businesses will be severely out of pocket, and possibly struggle to resurrect their businesses.
This commonly can happen if –
You don’t estimate your value correctly:
For example – If the total cost to replace your business assets and stock is £200k, but you’ve only taken out £100k of insurance, you’re under insured by 50%. This means that no matter what your claim value, the insurer will only pay out to the value of 50% – So, if you claim for £50k and you’re under insured by 50%, you’ll only be covered for £25k. This is known as the ‘average clause’ and can be costly for small and large businesses alike,
You underestimate the potential business disruption:
Business Interruption insurance covers trading and financial losses that are a direct consequence of an insured peril causing a business disruption. If you underestimate the amount of time it’ll take to resume normal trading after disaster strikes, you could see yourself out of business. It’s important to take into account the following factors –
- Building repairs including planning permission consent
- Machinery and plant replacement
- Stock replacement
- Staff salaries
- Rebuilding customer relationshipsJust to name a few. For more information on calculating your business interruption please Click Here.What can you do to make sure you’re not under insured?Don’t automatically renew your policy without reviewing whether you have sufficient levels of cover. If your business is growing, then the likelihood is that the cost of getting you back on your feet and back to those levels is growing as well. Speak to us and we will review your current cover and offer advice. }Quite simply the best way to avoid under insurance by making sure you regularly undergo a professional evaluation of your business value, specifically for insurance purposes.
At Edison Ives we have a number of solutions to assist businesses and help them avoid under insurance. Please Contact Us to discuss these options further.