The Price of Underinsurance Could be Devastating to Your Business

By SME Insurance

Posted 09/07/18


Most of us like to find a cheaper way to do things, but cutting corners with your insurance could put your business and livelihood at risk. Underinsurance can be a serious issue for businesses if they find themselves without adequate protection when things go wrong.


NFSP is committed to helping its members obtain the insurance cover they need to ensure they’re fully protected should the worst happen and without paying more than they have to. That’s why SubPostmasters Insurance Services, a trading name of SME Insurance Services, has been named the recommended insurance broker for NFSP members.

The Post Office will cover all your subpostoffice equipment unless it’s damaged due to negligence but it is important that you have your employee, public and product liability covers, and are fully protecting the rest of your business assets.

What is Underinsurance?

Underinsurance can happen if a business fails to take out the appropriate insurance to protect its property and goods. This may leave the business in a difficult situation should it need to make a claim. Put in its simplest terms, if the cost of rebuilding your shop premises is £1million but it’s only insured for £500,000 your insurer could impose a “proportionate” or “average” settlement penalty on your claim – leaving you with just £250,000 of cover. This could leave you substantially out of pocket and having to fund the remaining amount of the rebuild yourself. But underinsurance isn’t just about property – it affects most types of insurance [1].

Unfortunately, underinsurance can lead to the failure of a business if it’s unable to make up a significant financial shortfall. During the heavy floods in 2015 thousands of businesses were left in ruin due to inadequate insurance [2]. That’s why it’s important that you review the details of your insurance policy and know exactly what you’re covered for. And, if in doubt don’t be afraid to ask for advice – that’s where an insurance broker, like SubPostmasters Insurance Services can help.

When facing such a huge risk to your business the cheapest cover may not be the best option if it leaves you without the right type or level of cover you need.

You may be underinsured if:

  • Your buildings and physical assets are undervalued and therefore your sums insured is incorrect, or you reduced the figure to try and save money.
  • Your circumstances have changed, for example you’ve taken on new staff, or added an extension or new equipment, and this has not been updated in your policy.
  • You have miscalculated your gross profit and indemnity periods for business interruption insurance.
  • You renew your policy every year without checking or updating it.
  • You’re unaware of what cover is actually included in your policy.

There are many ways you could be underinsured. The important thing is recognising that and resolving it before it’s too late. Most businesses won’t find out they’re underinsured until disaster strikes. Don’t let that be you.

SubPostmasters Insurance Services can help

  • Taking out insurance through SubPostmasters Insurance Services gives you the opportunity to discuss your requirements and get advice from a team who understands the needs of NFSP members. This makes them different to a direct insurer or price comparison website, who typically don’t provide advice and require you to know exactly what you need.
  • The team are available throughout the lifetime of your policy, therefore if you need to make a claim or a change to your policy they’re here to help.
  • SubPostmasters Insurance Services has access to a panel of the UK’s leading insurers, so they can search for the find the right package for you – saving you time.

Call SubPostmasters Insurance Services on 0330 134 4576 for insurance advice and a no-obligation quote. Find out more for other insurance for shops.

 1 Zywave, Inc - JELF – The risks of underinsurance: protective your business, 2015


3 Zywave, Inc - JELF – The risks of underinsurance: protective your business, 2015

The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.

Posted 09/07/18

Author: SME Insurance

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