Underinsurance Uncovered

The very point of insurance is to give you peace of mind that you are protected should the worst happen. Purchasing insurance cover is the first step, but it’s vital to continually ensure you have the correct level of cover in place.


To ensure that commercial businesses do not unduly expose themselves to risks when setting sums insured and estimates it is always advisable to take professional advice when arriving at the necessary figures. This can be from your insurance broker, who is experienced in such areas and is in a position to offer guidance or from a specialist body who offers a building valuation service.

What can be done to avoid underinsurance? A few suggestions:-


  • You need to insure the rebuilding value – not the market value
  • Rebuilding valuations are best carried out every three years. Seek professional advice.

Machinery and Plant

  • Maintain an up to date register of all machinery, plant and contents
  • Insurance is usually arranged on a ‘new for old’ basis and sums insured must reflect this.

Business Interruption

  • The accounting definition of gross profit is different from the insurance definition. A quick proxy for insurance purposes is Turnover less Stock Purchases
  • A Maximum Indemnity Period of 12 months or less will often be inadequate. This should reflect the maximum time needed for the business to fully recover trading following a loss
  • Estimates should take into account business growth trends.

Employers Liability and Public Liability

  • Dont forget to ensure wage-roll and turnover estimates are up to date.

It is important to ensure that you have adequate cover in place to protect your business and checks on suitability should be undertaken at least annually. Advise your broker immediately of any changes necessary – if you are unsure please contact one of our commercial executives or handlers to discuss further.