Whether you're new to the motor trade industry or an experienced trader, it's essential you have the right insurance to protect against risks. If you don’t, the consequences of finding you're underinsured in the event of a claim could be financially devastating for your business.
What is underinsurance?
You have the right policies in place, but if the amount you're insured for—the sum assured—isn't sufficient, it may still have a shortfall when you come to make a claim. In other words, you will have to make up the shortfall. Imagine having to repair or rebuild your showroom following a fire at the cost of, say, £150,000, but your insurance payout is significantly lower than this amount because of an inaccurate property value.
When insuring your business, you should also be aware of the ‘Average Clause’. Say your business is valued at £2m but insured for £1m, and the unthinkable happens. In that case, the pay-out would be for 50% of the claim value at best, regardless of whether the claim is for the full £2m value or £100k partial loss.1
Motor traders also have the risk of inadequate indemnity periods to cover interruptions to business. For example, if the time it takes to rebuild your premises exceeds the original 12-month estimate (think of all the stages involved; planning permission requests, arranging architects, preparing the site, and that's before the rebuild even begins), you may be left with no income once the indemnity period comes to an end.
Avoiding underinsurance
The best way to avoid being underinsured is to regularly review the cover you have in place—particularly if you make substantial alterations or investments. These changes could include showroom modifications, tool or equipment purchases, and increases in the number of vehicles you possess. Rises in property values, rebuilding costs, and high inflation, can also impact the cover you need. Always speak to your broker, who will be able to advise if your cover should be increased.
Is your business protected?
If you haven’t recently, now is the time to review your existing policies. Taking just a short time to ensure your cover is sufficient will help protect your business. Make sure you have an accurate idea of the cost of replacing buildings, the true value of all the vehicles in your collection, and tools and equipment based on the current market value.
Our Risk Management Team are here to help ensure you’re fully insured. We can:
- Arrange and quote on a site rebuild cost assessment to check your sum insured; or
- Provide a desktop rebuild cost assessment – priced at £105 plus VAT (subject to qualifying data). This is completed by viewing a selection of data such as Google Earth, Street View, Industry Standard Quantity Surveyor Data and Building Cost Information Services from RICS. From this we calculate a rebuild cost.
Once we have an accurate rebuild cost assessment, we can work with you to review your building insurance policies and make sure you have the right level of protection in place.
Our motor trade insurance experts are here to discuss your business insurance needs. We can help ensure your cover is right for you, leaving you to concentrate on running your business.
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