How to avoid underinsurance in business
Not sure if you have the right level of insurance? You’re not alone. Around one in five small-to-medium enterprises feel the same way. Underinsurance can have serious consequences, potentially jeopardising the survival of your business in the face of a financial loss. But, despite this, it’s a common problem and approximately 90% of businesses don’t have adequate cover in place.
Here we offer a few top tips to help you avoid underinsurance and get the protection you need.
1. Know your own value
Getting your numbers right from the start is a good way to prevent underinsurance. You need to know exactly how much it would cost to replace your company assets. This isn’t their original value, but rather, it should take into consideration fluctuating exchange rates and inflation. It’s also a good idea to use a professional valuation service wherever possible (e.g. to value your business premises).
2. Devise a plan
It’s always wise to prepare for the worst-case scenario. It probably won’t happen but, if it does, you need to have a plan in place to ensure your business’ survival. Sit down with other key people and consider all situations that could lead to a financial loss. Not only will this improve your company’s resilience, it will also help to determine how much coverage you actually require.
3. Re-assess the policy
A common mistake is to automatically renew your insurance, without reviewing the level of cover. Business circumstances can (and do) change. Perhaps you’ve won a new contract, expanded your premises or upgraded your equipment? If the company has grown, it’s likely that your recovery costs have grown too – and, to prevent underinsurance, you should re-assess the policy on a regular basis.
4. Set a realistic indemnity period
If your business has suffered a bad financial loss, getting back on track can take a while. It’s not an easy feat. In fact, most organisations take 24 months or more to return to their former level of profitability. You’re likely to hit many challenges and delays along the way – which is why it’s important to consider your indemnity period carefully and give yourself plenty of time to recover.
5. Talk to a financial advisor
Seeking the help of an independent advisor – such as Rigby Financial – is, by far, the easiest way to avoid underinsurance. We’re an expert in the field; a trusted and professional third-party. We can offer tailored advice on the right level of cover for you and, acting as an intermediary between you and the insurers, we will negotiate on your behalf and secure the ‘perfect’ insurance for your needs.
Need further advice on underinsurance?
If you’re concerned about your current level of business insurance and suspect you may be underinsured, further information can be found in our online white-paper.
Our team are also on hand and happy to help. We understand that business insurance can be confusing and it’s difficult to know if you have the right policies in place. If you have any questions about underinsurance, please feel free to get in touch. Either call us today on 01744 886077 or send an email firstname.lastname@example.org and let us identify the ideal level of coverage for you.