What is underinsurance?

What is underinsurance?

Underinsurance is a huge problem across the property insurance industry with up to 80% of property in the UK thought to be Underinsured.* No one wants to be told that their claim will not be paid in full by the insurer but if you are underinsured this could be the reality you are faced with.

Insurance premium is calculated based on the risk posed to the underwriter and the amount or level of cover the insured chooses to take out in order to protect their business or their own interests. Underinsurance occurs when a policyholder does not cover themselves adequately, which could lead to a potential shortfall in any claim made to the insurer. This can be due to a number of reasons such as failure to cover the correct Sums Insured, limit of indemnity or indemnity period.

There are several factors that can affect how much insurance a buyer needs, and if there is any uncertainty, this is where the advice from an insurance broker can be invaluable. If the level of cover proves to be too low, the insured could face large financial losses when making a claim.

What to look out for?

  • If the property is listed
  • If the building is made of stone
  • If the building was constructed before 1920
  • If the building has never had a valuation or it has been more than 10 years
  • If the building is eco-friendly
  • If the building has been recently altered
  • If the building is in a location with difficult access
  • If the building has been significantly modified
  • If the building has extensive external features
  • If the building’s value has been based on a developer’s costs
  • If the building’s sum insured has been based on market value

How can I protect myself?

Make sure you make your insurance broker aware of any changes to your business, and if you need further guidance, do not be afraid to ask for professional help.  

What next?

If you are unsure or believe that your property may be underinsured, give us a call now on 01789 761660 and have a chat with us.

If you want to see first-hand evidence of the potential savings that can be made from having your property correctly insured then please see our case example on underinsurance here:


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