Tips for avoiding business underinsurance

Business underinsurance occurs when a business doesn’t have sufficient financial protection in its insurance policies, to cover its risks. It’s a serious problem that’s estimated to affect 80% of UK small and medium-sized enterprises (SMEs)*.

To limit your chances of falling into the underinsurance trap, we recommend:

1. Consult an independent insurance broker – they’ll be able to give you advice to ensure your business is adequately protected.

2. Review your requirements ahead of your renewal – keep a record of your assets and liabilities and check them annually.

3. Value property based on the rebuild valuation—not the market value. A qualified professional, such as a building surveyor, needs to do this.

4. Don’t underestimate the value of your business’s assets to try to get cheaper cover—in the event of a claim, this could cost you far more than you’ve saved.

5. Be realistic about business interruption indemnity periods—while 12 months is the standard period, many consider 24 months more realistic.

6. Check your liability limits and contractual obligations – you may find you are contractually obliged to have higher limits in place.

7. Be aware of new risks—for example, with cyber-attacks on the rise, it could be a good idea to consider cyberinsurance.

8. Have a disaster recovery plan in place—this will help speed up your business’s recovery and can avoid exceeding indemnity limits.

9. Factor in inflation when setting limits – rising prices could leave you out of pocket in the event of a claim. Review policy limits and look at what the inflation rate over the past year has been.

10. Include costs such as potential fees for solicitors, IT professionals and accountants – these may require additional cover.

For advice contact Des Henderson on des.henderson@jensten.co.uk