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BUSINESS & FINANCE • 59
How to Protect Your Business with Confidence
The growing issue of under insurance is a concern for businesses large and small . It is also worrying to government-backed organisations such as the National Association of Professional Inspectors and Testers ( NAPIT ).
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HERE , NAPIT OFFERS HELP WITH A guest blog from its friend and ally , the British Insurance Brokers Association ( BIBA ). BIBA chief executive Steve White describes how you can protect your business with confidence and gain awareness of the dangers of under insurance in an ever-evolving industry .
At present , under insurance is an increasing problem that has the potential to cause devastating consequences for businesses across the country . While it is mostly a pleasant surprise to realise that an asset that you own is worth more than you had originally thought , if these have been accidentally under insured then this can lead to disastrous consequences with any future insurance claims . In the worst case , it can result in more premium being charged , different policy terms applied , or a reduction of claim payments .
‘ it is worth remembering that the problem of under insurance is not just limited to buildings and contents ’
To make matters worse , the issue of under insurance is being exacerbated with the lead up to Brexit as the value of the pound falls . This has made it more expensive for businesses to import goods such as replacement equipment and tools . Indeed , it is worth remembering that the problem of under insurance is not just limited to buildings and contents , although it is of course vital that these are adequately insured . You should also consider intangible ‘ unknowns ’ such as the cost of defending an allegation of legal liability against your business , together with any settlement or award of damages .
With regards to commercial buildings and contents , there are three simple steps that can be taken to negate the risks of under insurance .
You should always ensure that :
• Buildings are insured for the rebuild cost and not market value .
• Contents , plant , tools and equipment are insured on a replacement as new value , not the value on your balance sheet .
• Stock sum insured represents the cost of raw materials , work in progress and finished goods .
Moving back to liability risk , it is possible to work out its value by thinking about any potential claims that might be brought against you or your business . Claims can be brought upon by numerous factors , such as damaging or injuring a person or property .
Making an estimate of the value of awards that might be made against your business and their frequency will help you to request a suitable level of cover as a ‘ limit of indemnity ’. Most of the time insurers offer levels of £ 5 million to £ 10 million of indemnity cover , which might seem a lot but can equally prove not to be enough if there is a serious incident or numerous connected claims . If you are looking for any advice on this , you would have to get into contact with an insurance broker since this is a highly technical area .
Another key consideration to make is exploring business interruption cover . Regarding this , businesses should be aware that two years is more than likely to be the minimum period needed to rebuild a property , fully recover a trading level and regain a customer base . Bearing this in mind , choosing a minimum of 24 months as an indemnity period is always wise . Furthermore , businesses should also consider buying declaration-linked insurance because it provides an uplift to the sum insured of 33 %. This is , however , providing that the sum insurance and period of indemnity are correct initially and declarations are made when requested by insurers .
‘ the stakes could not be higher at the moment and therefore it is important to make sure you are sufficiently protected ’
All in all , whether or not the value of your businesses assets and risks are going up or down , it is always wise to carry out regular reviews and work with your broker to understand the basis of your cover and the level of insurance needed . As mentioned , the stakes could not be any higher at the moment and therefore it is important to make sure you are sufficiently protected .
To provide you with further information and help on these issues , BIBA has produced a guide with backing from the Federation of Small Businesses .
info @ napit . org . uk www . napit . org . uk
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