Understanding under-insurance
Ensuring you have enough insurance is as important as having
insurance in the first place.
Under-insurance could affect the amount of money you receive in
the event of a claim, but there are some easy steps you can take to
ensure you have the right amount of cover in place for your
business.
Under-insuring your laboratory is a false economy. Whilst you
may save some money in premiums, it will often affect the amount of
money you receive when you come to make a claim. For example,
suppose your business contents should be insured for £100,000 - but
you have insured them for only £75,000. There is a major fire and
you need to make a claim for £30,000. You might think that the
insurance company will pay you the whole of the claim, because it
is less than the amount of your sum insured.
Unfortunately this is not the case. Because you were only
insured for 75% of the value of your business contents (and were
therefore only paying 75% of the premium for the insurance you
really needed), your insurance company will only pay 75% of the
claim. So, you will only receive £22,500. and you or your business
will have to find the remaining £7,500. This insurance principle is
called 'average' and applies to most policies. Once you’ve grasped
it you need to ensure you are correctly insured, and that you
review your Sums Insured regularly so that your insurance cover
doesn’t fall behind as your business develops (e.g. buys equipment
and/or invests).
What we recommend you do
Where should you start? You probably have three choices: ask
your insurance broker (remember they should have been doing this
for you anyway as part of your annual policy renewal), find a
better broker, or do it yourself. If you choose the last option
here’s what to do.
- First thing is to make the time - set aside at least two hours,
by the end of which you'll have a fairly clear idea of the size of
any potential problem
- Get kitted out. You'll need:
- A copy of our Contents calculator guide
for surgeries
- Calculator
- Pen and paper
- Your current insurance schedule with details of current
buildings and contents sums insured
- Hidden item - don't remove
- Hidden item - don't remove
- Work through room by room using the preset headings to build up
a final estimate of the value of your business. If you’re unsure
about any of the headings or figures you’ve entered make a note of
them and remember to get advice when you speak to your broker (see
below)
- Finally total up all the columns. You should now have a working
figure for your current Sums Insured value. Now compare it to your
last insurance schedule. If the new figure is more than what's
shown on your schedule you are potentially under-insured. Our
advice is to speak to your broker immediately, seek their advice,
and review your Sums Insured figures if necessary
It's an easy trap to fall into - why waste time on insurance -
all your time and energy should be spent growing the business and
dealing with patients. We speak to businesses that haven't reviewed
their Sums Insured for several years. Ask yourself this - why spend
time developing a business if you're prepared to watch it go up in
smoke and lose the lot? Be determined - find two hours and protect
your business properly.