{"id":116,"date":"2023-09-08T12:45:29","date_gmt":"2023-09-08T11:45:29","guid":{"rendered":"https:\/\/rowett-insurance.co.uk\/blog\/?p=116"},"modified":"2023-09-08T12:45:29","modified_gmt":"2023-09-08T11:45:29","slug":"underinsurance-explained-with-aviva","status":"publish","type":"post","link":"https:\/\/rowett-insurance.co.uk\/blog\/2023\/09\/08\/underinsurance-explained-with-aviva\/","title":{"rendered":"Underinsurance explained, with Aviva"},"content":{"rendered":"\n

What is underinsurance?<\/h2>\n\n\n\n

Underinsurance occurs when you don\u2019t have enough insurance cover to meet your needs. So, if the declared values of property and assets aren\u2019t correct, or when the time it would take to get your business back up and running after a loss is underestimated, you could be underinsured.<\/p>\n\n\n\n

Unfortunately, the unexpected can happen and you may<\/em> need to make a claim.<\/em> If you do, the last thing you want to hear is that the level<\/em> of insurance cover you have won\u2019t cover your costs.<\/em> But that\u2019s what could happen if you\u2019re underinsured.<\/em><\/p>\n\n\n\n

How could I be underinsured?<\/h2>\n\n\n\n

Incorrect Sums Insured limit<\/h3>\n\n\n\n

It\u2019s not nice to think of, but if you were to suffer a large loss tomorrow, how much would it cost to completely rebuild and reinstate your business?<\/p>\n\n\n\n

This is what your Sums Insured limit covers. And it\u2019s not just the bricks and mortar. This covers the cost of replacing key components including plant machinery, and equipment.<\/p>\n\n\n\n

Inadequate Business Interruption (BI)<\/h3>\n\n\n\n

If you\u2019ve thought about the cost of rebuilding and reinstating your business, how long do you think it would take to get all of that building work agreed and completed, and your equipment ordered and installed? Not to mention the time it will take to build back your customer base to previous levels. This is where your business interruption period comes into play. If your BI limit isn\u2019t adequate, you may not be able to cover the full estimated loss of earnings during a period of reinstatement, leaving you financially vulnerable.<\/p>\n\n\n\n

Not reviewing these limits regularly<\/h3>\n\n\n\n

If you haven\u2019t had an independent professional valuation done in the last 12 months, we\u2019d highly recommend you do so. It can be difficult to understand exactly how much cover you need at the best of times, but right now, it\u2019s trickier than ever \u2013 inflation, increased cost of building materials, supply chain disruption and a shortage of skilled workers are all causing the cost of getting back to business to go up.<\/p>\n\n\n\n

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What about indexation?<\/strong><\/p>\n\n\n\n

If the initial Sum Insured are<\/em> too low, the indexation applied to<\/em> your policy in line with inflation<\/em> may have little to no impact.<\/em> What\u2019s more, inflation indexation<\/em> alone won\u2019t account for costly<\/em> delays or increases in other<\/em> costing factors.<\/em><\/p>\nAviva Business Insurance<\/a><\/cite><\/blockquote>\n<\/blockquote>\n\n\n\n

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From Aviva<\/a><\/figcaption><\/figure>\n\n\n\n
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Did you know…<\/strong><\/em><\/p>\n\n\n\n

10% of SMEs \u2013 that\u2019s more than half a million UK businesses \u2013 believe<\/em> they wouldn\u2019t survive if they had to pay up to \u00a310,000 towards a<\/em> claim that wasn\u2019t fully covered by insurance<\/em>.<\/p>\n<\/blockquote>\n\n\n\n

Why won\u2019t an insurer always cover the full loss?<\/h2>\n\n\n\n

Any claim will only be paid based on the amount of cover chosen. This is called the \u2018average clause\u2019. Any claim you need to make \u2013 however big or small \u2013 will be impacted by the percentage difference between your recommended total sum and the actual sum for which you\u2019re insured.<\/p>\n\n\n\n

You should carefully consider the percentage difference between the recommended cover limits and the amount you choose to cover, rather than simply focusing on the total amounts.<\/p>\n\n\n\n

What are the consequences?<\/h2>\n\n\n\n