As our trusted insurance partner, we want to remind you of the importance of ensuring your clients’ business is adequately protected against unexpected events—particularly those related to storm damage, and business interruption.
With weather patterns becoming increasingly unpredictable, timely action can make all the difference in helping your clients recover quickly and smoothly. We encourage you to:
- Review your current coverage to ensure it reflects your client’s needs.
- Consider additional protection for high-risk operations or obtaining independent valuations.
- Ensure your clients’ business interruption insurance is up to date and accurately reflects operational risks.
Insuring your client’s property for the correct sum insured is essential because it ensures that their business is fully protected in the event of a loss. Here’s why it’s best to get the sum insured right:
1. Avoid Underinsurance
If the sum insured is too low, your client may face significant financial losses. Most insurers apply the “Average Clause” in commercial property insurance, meaning:
If your client insures their property for less than its actual value, any claim payout will be reduced in proportion.
Example:
- Property value: $1,000,000
- Insured for: $500,000 (50% of value)
- Loss: $200,000
- Insurer pays: $100,000 (only 50% of the loss)
This shortfall could cripple their business financially.
2. Ensure Business Continuity
Having the correct sum insured means your client will have enough funds to rebuild, repair, or replace damaged assets, allowing them to get back to business faster after a loss (like fire, storm, theft, etc.).
3. Compliance with Lender or Lease Agreements
If their property is mortgaged or leased, the lender or landlord may require proof of adequate insurance. Underinsuring could put them in breach of contract.
4. Covers Full Replacement/Reinstatement Cost
The correct sum insured should reflect the full cost of rebuilding the property (not market value), including:
- Demolition and debris removal
- Professional fees (architects, surveyors, etc.)
- Compliance upgrades (e.g. building code updates)
- Inflationary increases during the rebuild period
In Summary:
Insuring for the correct sum ensures that:
- Your client is not penalised during a claim
- Your client will pay a fair premium
- Your client’s business can recover quickly after a disaster
If you have any questions or need assistance with coverage options, claims processes, or risk mitigation strategies, the Lion Underwriting team is here to support you.