Underinsurance in the commercial market can have a significant affect on your business in the event of needing to make a claim. Here we cover FAQ’s regarding commercial insurance for healthcare practices and how you can practically ensure that you have the correct level of insurance cover.
What does is mean if your practice is underinsured?
Insurance is calculated based on various factors relating to your own business circumstances, such as:
the value of your business premisesthe stock you holdthe contents owned by your business, including computer equipment, furniture and fittingsthe risk of interruption to your business activities in the event of a disaster
When insuring your business certain measures can be taken to accurately calculate the value you need to be insured for.
Underinsurance arises when you miscalculate the amount of insurance cover you need.
For example, if your business premises, contents and stock are worth £100,000 but you only insure them for £75,000, your business is underinsured by 25%. In this situation you could find yourself having to foot the remainder of the bill should you experience a fire, flood or other disaster where by you lose everything, as the insurance company will only pay-out on a claim to the value of the insurance policy.
Signs that your business could be underinsured
An insurance broker can help you assess if you are underinsured, and help with adjusting your policy so you have full protection.
Signs that your practice could be underinsured:
- Your business premises has not been valued, professionally, for three years
- You altered or extended your business premises and didn’t update the policy
- Your business premises has been valued, for insurance purposes, based on market value. It should be based on the cost to rebuild the property in the event of a disaster.
- Your insurance calculations didn’t factor in gates, fences and car parking
- Your property is a listed building. Here costs to rebuild and replace elements would be greater than in normal circumstances and need to be taken into account
- You haven’t calculated for solicitor and architect fees, as these services are often required if the property needs major works
- You haven’t included site clearance fees, of equipment hire if major works are required
- You haven’t conducted an accurate stock take recently. If your business holds more stock than before then this needs to be taken into account
- You purchased new equipment and didn’t add it to the policyYou haven’t considered business interruption in the event your business can’t operate for a while.
It is important to always update your insurance broker, or insurance company, when there are changes to your business set-up, in any way.
Business interruption insurance
Business interruption insurance can be added to a business insurance policy for added protection.
It is important to remember that any major building works will take time to complete and during this time your practice may need to close.
Things like planning permission can take considerable time, so often at least a 12-month window is required to account for a worst-case scenario.
If your practice needs to close for many months, patients may also go elsewhere, so business interruption insurance would cover your income whilst you build up your patient-base again.
A survey by Aviva showed 62% of UK small businesses did not have business interruption insurance. However, 21% had experienced business interruption of one form or another.
Speak to your insurance broker about business interruption insurance and they will help you to understand it’s importance and the level of cover you require for your situation.
Underinsurance is common for businesses
According to Zurich insurance, up to 80% of commercial properties are underinsured.
This statistic is supported by Aviva as following an assessment of a sample of clients in 2014, they found that 77% had underinsured their commercial property by approximately 45%.
Many other reputable insurance companies show similar statistics.
Working with a specialist insurance broker that understands the healthcare sector will help to offer your business the maximum protection for all eventualities, whilst still seeking the lowest premiums for you.