3 key steps to protect businesses from underinsurance
3 key steps to protect businesses from underinsurance
Underinsurance is a problem that can affect businesses of all sizes, with small and medium-sized businesses (SMEs) being particularly vulnerable. Building underinsurance occurs when a property is not insured for its full rebuild cost, leaving businesses exposed in the event of damage or total loss.
Without sufficient coverage, companies may face significant financial shortfalls when making a claim. This guide outlines three essential steps to help businesses ensure they have the right level of buildings insurance and avoid costly gaps in coverage.
Step 1: Know what building underinsurance means
Many businesses unknowingly fall into the trap of building underinsurance due to rising construction costs, outdated valuations, and/or policy limits that do not reflect current rebuilding costs.
If a property is underinsured, any claim may be reduced proportionally, leaving businesses to cover a significant shortfall themselves.
Step 2: Get accurate valuations
Buildings should be insured for their rebuild cost (the amount needed to rebuild the building), not their market value. This includes materials, professional fees, and demolition costs.
Use desktop assessments from RebuildCostASSESSMENT.com, part of RiskSTOP Group Ltd, to check the rebuild cost regularly and ensure the sums insured matches current rebuild costs.
Correct valuations help avoid the ‘average clause,’ which can reduce insurance payouts if coverage is too low.
Step 3: Keep insurance policies updated
Review insurance policies every year or whenever there are significant changes to the property, such as renovations or structural modifications.
Next step: Sign up for our building underinsurance webinar
Learn more by joining RiskSTOP’s upcoming webinar, in partnership with RebuildCostASSESSMENT.com on building underinsurance. During this event, we will share helpful tips to ensure businesses have the right coverage.