Take care with asset valuation…
So you reckon you know what your assets are worth. But do you really?
It’s important to remember that even if your business has acquired every type of relevant insurance policy, if you’ve underestimated the value of your property, contents, equipment or other assets you could be horribly exposed.
Underinsurance can have major consequences in the event of a loss, and could spell the end for your business. For a policy to work as intended – restoring your business to the position it was in before the loss – a considered and accurate valuation process is required.
If valuations are based on assumptions, old information, or misleading advice, then you’re heading for trouble. Most businesses need to get up and running again quickly after a loss. But if there is no solid basis for declared values, this can lead to lengthy investigations lasting months or even years. This in turn can delay crucial claims payouts.
If the business is found to be underinsured, then your payment won’t cover the full loss and you’ll have to make up the shortfall. It’s also worth remembering that this isn’t just an issue in a total loss scenario. If something happens that isn’t a total loss, don’t assume that you’ll always get paid up to the sum insured.
Some policies include an “average” clause, which means that underinsurance can result in reduced claim settlements even for partial losses.
Worst of all, if your insurer concludes that values were deliberately understated then the claim could be declined.
Carrying out a proper valuation process is simpler than you think – and we can help. As well as ensuring there is no gap in the event of a loss, this process can help fast-track the claims process and minimise interruption to operations.
So never undervalue your business, either through carelessness or as a deliberate ploy to lower premiums. On the other side of things, you shouldn’t “err on the side of caution” and over-value, either. Because that’s just a waste of your money.
What’s needed are useful internal processes such as up-to-date asset registers that keep your company’s asset valuations on that narrow accurate line.
We live in uncertain times, with major losses a very real possibility, and you’ve invested too much in your business to put its future at risk. So call us and we’ll help make sure your assets are valued correctly.
This article originally appeared on Adroit Insurance & Risk Blog and has been published here with permission.