The Business Exchange Bath & Somerset Issue 14: Winter 2019 | Page 13
BUSINESS ADVICE
ADVERTISING FEATURE
CONTRACTORS - COULD UNDERINSURANCE
COST YOU YOUR CLAIM?
by Heather Houlihan, Jelf, Bath
British contractors could be risking huge
financial penalties by failing to update their
insurance policies.
According to a recent survey, 50% of
contractors including builders, plumbers,
roofers and electricians are not sufficiently
insured to cover their losses.
So, what are the true costs of underinsurance
and how can you avoid it?
Underinsurance explained
All contractors need a certain level of business
insurance cover to protect them for accidents,
loss or injury in their day-to-day work.
When taking out a new policy, you are asked
to declare an ‘insurance value’. This is the value
your insurer is agreeing to cover in the event of a
claim. It is also the value used to calculate your
monthly premiums.
If at the time of a claim this value is no longer
in line with the true value of your assets, not
only could your insurer refuse to pay the full
sum, but you may even have to pay an excess to
make up the difference.
Sound unfair? This is actually something you
agree to when signing your policy. It’s called
‘Average Conditions’.
Average conditions
From an insurance point-of-view, being
underinsured means you are not paying the
right level of premium to cover your loss. This is
where Average Conditions comes in.
Average Conditions is there to make sure you
get the correct pay-out based on the premium
you’ve been paying.
This means that if you are only insured for
50% of your loss, you will only get a pay-out for
50% of your original insured value.
Let’s look at an example:
Three years ago, you took out business
insurance cover to the value of £2,500. Since
then, your business has grown, enabling you to
invest in more expensive equipment. Your assets
are now worth £5K, however you haven’t got
around to updating the value on your insurance.
Unfortunately, you suffer a theft. Your
business is broken into and £2,000 worth of
tools and equipment is stolen.
Being underinsured, your insurer agrees
to pay you in line with the Average Conditions
agreement in your policy. Your £2,000 claim, now
looks something like this:
• £2,500 is 50% of the actual £5k value
of your assets
• This means your insurers are only obliged to
pay 50% of the £2,000 loss = £1,000
• They then deduct a £300 excess fee
• Making your total insurance pay out: £700
You are now left with £1,300 worth of tools to
replace from your own pocket.
Don’t take the risk
[email protected]
01225 476525
For more info:
www.jelf.com
As you can see, underinsurance can come with
a high-price tag. And, while not all insurance
policies have an Average Conditions clause, you
should always make sure you fully understand
the terms of your policy before you sign.
It’s vital to update the value of your insurance
cover at least once a year to avoid facing
penalties for underinsurance. Not doing so,
could leave you without essential cover when
you need it most.
Jelf Insurance Brokers Ltd (Reg No. 0837227). Registered
address: Hillside Court,Bowling Hill, Chipping Sodbury,
Bristol BS37 6JX (Registered in England and Wales).
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THE BUSINESS EXCHANGE 2019
13