The Business Exchange Swindon & Wiltshire Edition 46: Dec/Jan 2019 | Page 43

ADVERTISING FEATURE CONTRACTORS - COULD UNDERINSURANCE COST YOU YOUR CLAIM? by Ian Sharpe, Senior Account Director for Jelf in Swindon 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 are 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 [email protected] 01793 714431 You are now left with £1,300 worth of tools to replace from your own pocket. For more info: www.jelf.com Don’t take the risk 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). 3 Richmond house SWINDON A unique opportunity to occupy a 11,696 sq ft (1,086 sq m) self contained headquarters office building on a well connected office park on flexible and competitive terms. 01793 847 470 www.smethurstpropertyconsultants.co.uk Andy Smith Martin Booth Daniel Smethurst THE BUSINESS EXCHANGE 2019 43