What is underinsurance?
Underinsurance is another way of saying that you do not have enough insurance for your needs. If, when you come to claim on your insurance policy you do not have sufficient insurance to cover the losses you have experienced then you are underinsured.
Underinsurance typically occurs when businesses fail to correctly estimate the level of cover, they need to protect their assets and costs of getting back up and running.
What are the risks to businesses of being underinsured?
If something goes wrong, such as a fire, theft or flood at your business premises then you want to be sure that any financial losses will be covered by your insurance policy.
Not having sufficient cover in place can put the financial security of your business at risk. If you do not have enough insurance in place, or the right type of insurance in place, then you will have to find other means with which to cover the financial losses that your business faces.
What impact could COVID-19 have on the risk of underinsurance?
Sadly, many businesses have been hit hard by COVID-19. Your business may have had to shut its doors completely for many months over the past year, with a devastating financial impact. This closure may have also seen you adapt your business and change the way that you operate.
Cutting back on insurance cover
Unfortunately, insurance may be an area that struggling businesses look to cut or cut back on by:
- reducing the amount of insurance cover that they have
- reducing the types of insurance cover that they buy
Both of these can lead to businesses underinsuring. It is important to be realistic about the insurance cover that you need. Whilst cutting back on insurance could save money in the short term if something were to go wrong you could face a much more devastating financial situation.
Not having the right insurance covers
Equally, not having the right insurance cover in place for new risks can also see your business underinsured.
Your business may have adapted and diversified during the COVID-19 lockdown – for example setting up a website and online presence when you were unable to open your shop. Such a change in business strategy and operations can see you take on different risks which require different insurance covers. In the example above, you may now have a need for cyber insurance given the risks associated with an online presence.
Not recognising that you have a need for additional insurance cover and investing in these covers can also see you underinsured.
Steps to take to avoid being underinsured
Regularly review your business risks and insurance needs
If your business operations change and you open up new risks to your business, you need to consider if you have a need for different types of insurance cover. New risks also emerge continually regardless of whether you change your business strategy. Insurance will form a key element of your business risk management strategy. It is therefore important to regularly ensure that your insurance cover reflects your businesses risks.
Make conscious buying decisions
We would always urge our customers to buy as much cover as you can afford. And to make conscious buying decisions. Be aware of the cover that you are buying and buy the cover necessary for your business. If you choose not to purchase an insurance cover then do this knowingly. Not understanding or lacking knowledge of what an insurance policy covers isn’t a reason to not purchase it. Do your research, work with an insurance broker and actively decide if a certain type of insurance is right for your business or not based on the real risks that your business faces.
Work with an insurance broker
We passionately believe in the benefits that working with an insurance broker can bring to your business. Of course, you are we hear you say, you’re an insurance broker. And whilst this is true, we like to think that we go above and beyond to help our customers.
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- An insurance broker won’t charge to work with you to understand your insurance needs and provide relevant insurance quotes
- We are experts in insurance – insurance needs to be understood and most buyers seek professional advice rather than going it alone. Work with an expert who understands the terminology, complexities, small print and the detail
- Anthony Jones have built up strong relationships with insurers, helping us to access the best possible price for your insurance
- We do the hard work and save you time by going out and getting quotes on your behalf
- We can also support you through the claims process if the need arises
As an experienced broker we have a wealth of knowledge at Anthony Jones. Our wide customer base and experience of risk management means we are well placed to advice you of emerging risks which may impact your business. As well as helping you gain the right insurance at the best possible price at a time when insurance costs are rising. If you want to speak to us about your business insurance requirements, then call us on 020 8290 9080 or email us at business@anthonyjones.com
