What is underinsurance?
Underinsurance means that a business’s risks are greater than what that business’s insurance can cover.
Being underinsured means you will likely not be fully financially covered if a disaster were to happen to your business or property.
This can easily be calculated using the underinsurance formula.
(Policy Sum Insured/Correct Sum Insured) x Claim = Payment
Although the underinsured party’s sum insured often way exceeds of the claim amount, they would be left with a shortfall.
Therefore the underinsured party will have to pay their own money to cover for this shortfall.
Why is it important to know the dangers of underinsurance?
AN ESTIMATED 40% OF UK BUSINESSES ARE UNDERINSURED.
A QUARTER OF UK SMES SAID THAT THEY WOULD CLOSE IF THEY HAD AN UNEXPECTED BILL OF £50,000.
ARE YOU FULLY COVERED?
Download our underinsurance whitepaper to learn about recent developments and how you could be at risk.
Listen to the Underinsurance Podcast
Stuart Dobbins details the recent changes to the insurance market and how it could have a potential effect upon valuations.
For more from the Romero Expert Insights podcast series, see here.
SMEs risk the dangers of Underinsurance
Many SMEs (small to medium-sized enterprises) have been tempted to reduce their cover, cutting a range of insurance policies, and becoming dangerously underinsured.Find out the dangers today