The dangers of underinsurance can have serious consequences on you personally and your business.
Insurance policies are there to protect you and your business. Without adequate cover you could end up out of pocket – which could run into thousands if your property isn’t valued properly.
Depending on the severity of property losses and associated rebuilding operations, paying these costs out of pocket could lead to major financial setbacks and—in certain scenarios—bankruptcy.
Additionally, property undervaluation can sometimes result in co-insurance penalties. Most commercial property insurance policies include co-insurance clauses, which encourage policyholders to carry reasonable and accurate amounts of cover.
Under a coinsurance clause, a policyholder is subject to a penalty—generally, a reduced payout—if their cover limit is not at least equal to a predetermined percentage (eg 80%) of the value of their property.