Rising construction costs, inflation and supply chain disruptions have made underinsurance one of the biggest risks facing Australian businesses today.
Many business owners renew their insurance each year without reviewing whether their sums insured still reflect the true cost of rebuilding or replacing their assets. As a result, they may unknowingly be carrying cover that falls short when it is needed most.
Commercial buildings, plant and equipment, stock, fit-outs and business interruption exposures should all be reviewed regularly to ensure values remain accurate. If these figures are outdated, a significant claim could leave the business responsible for funding a substantial shortfall.
One important consideration is the application of an average or co-insurance clause. If an asset is insured for less than its actual replacement value, the insurer may reduce the claim payment proportionately. Even a partial loss could therefore result in the business contributing more than expected towards repairs or replacement.
Business interruption is another area that is often underestimated. Rebuilding after a fire or major insured event can take many months, particularly where planning approvals, labour shortages or supply chain delays are involved. An indemnity period that seemed adequate several years ago may no longer reflect today’s realities.
Regular insurance reviews can help ensure replacement values remain current, operational changes are reflected in the policy and cover continues to align with the needs of the business.
An independent valuation may also provide confidence that declared values accurately reflect today’s rebuilding costs.
Insurance should evolve alongside your business. Taking the time to review your cover now may help avoid costly surprises when a claim occurs.
If you would like to discuss your current insurance arrangements or potential underinsurance risks, contact Ponton & Co. Insurance Brokers.
