Underinsurance is a Risky Business

When running a business, there are lots of costs to keep an eye on. From wage roll to utilities, prices are increasing and you take this into account when budgeting and forecasting. But have you thought about the increasing costs of materials and labour if the building your business operates from needed to be rebuilt from scratch? For instance: if it was destroyed in a fire?

When did you last review the Sums Insured for your building’s Insurance?

Insurance valuation providers, RebuildCostASSESSMENT.com, conducted a recent study that revealed businesses may be facing a huge shortfall in cover. They estimated that British occupied businesses could be collectively underinsured by up to £325 billion. Their study also highlighted:

  • 9/10 Commercial Properties are insured for the wrong amount.
  • 79% of UK properties are underinsured. On average, they are only covered up to 69% of the amount they should be.

As James Scott-Brown from RebuildCostASSESSMENT.com explains:

“Shops, factories, warehouses and many other types of commercial buildings across the country are woefully under-protected in the event of any kind of damage…with businesses already struggling financially many simply would not currently survive the consequences of underinsurance, which unfortunately many property owners and small firms in particular are unaware of.”


Underinsuring your property could mean a claim settlement may not cover the total cost of reinstating your property. Insurers may apply ‘average’ to your claim which takes into account the proportion of underinsurance and applies it to your settlement. For instance: if your property is underinsured by 50% then any claim payment, regardless of whether it is a total loss or not would be halved. Not getting the full settlement would leave you out of pocket or, in extreme circumstances, lead to business closure.

On the other hand, it could be that your property is overinsured. The data from RebuildCostASSESSMENT.com states that 14% of businesses have overinsured their buildings by an average of 121%. So reviewing the value of your property might mean a saving on insurance cover!

At JMP we will review your building’s insurance requirements and will recommend a desktop appraisal service if the rebuild figure has not been reviewed by an expert surveyor. If you would like any advice on how to correctly insure your business, give our expert team a call.