Getting the level of cover right for your business is not easy. In fact, according to a study by Aviva, one in five small to medium sized businesses aren’t confident they have the right level of cover, with some companies being found to be almost £500,000 underinsured.
The risk of being over insured is that it will likely mean a higher premium with no additional reward in the event of a claim. Underinsurance, on the other hand might mean a slightly lower premium up front but potentially a big uninsured bill and a big headache if things go wrong.
All Med Pro’s practice insurance typically includes cover for:
- Public and employer liability
- Practice contents
- Buildings or tenants improvement
- Full equipment breakdown
- Walk-in theft
- Loss of gross revenue
You can also choose to cover terrorism, Cyber liability, key-person or locum, and pressure vessel inspection for dentists.
Making sure you are not underinsured
The three main areas that you should consider carefully to avoid underinsurance are buildings, contents and business interruption requirements as these are the big areas that you will likely have to calculate values for yourself.
What many practice owners don’t realise is that if you under value these areas and you make a claim an insurer may not pay the full amount under the ‘average clause’.
If this is in your contract, and you are claiming say, for £25k of contents damage with a sum insured of £100,000 you might not think this matters.
However, if the insurer deems that your full contents value is in fact £200,000 and have under valued the amount by 50%, they will only pay 50% of this claim – leaving you £12,500 out of pocket.
Now imagine you need to rebuild your whole surgery or practice and your insurer only pays out half the total cost for contents. That would be £100,000 you’d have to find replace everything. A sum of money that you don’t want to lose.
Tips for valuing your practice
In terms of your risk management strategy, underinsurance is a huge potential risk, but can be sufficiently avoided with good practice and a bit of leg work.
Follow our tips below to help you accurately value your practice.
- Remember that the building rebuild value is different to the market value. You should take into account things like pipes, drains, additional outbuildings, car parks etc. Also remember professional fees, such as architect costs, which might be required.
- Consider what refurbishments or improvements you’ve made to the building. These will add to the rebuild cost if you want to ensure your practice is returned to the same level.
- Review your contents regularly. You can go through invoices and receipts to calculate its value. If you buy new equipment, make sure this is added to your policy. It is recommended that you have an equipment inventory so you have an accurate idea of items and value to hand.
- Contents means the items you’d take with you if you moved – walk each room and tally the cost of your property. It will likely add up to more than you think to replace.
- Business interruption or continuity cover should be calculated based on the expected gross profit over the period your practice might be shut. Also consider how long you would want this cover to last in the event your practice can’t open – this is best to discuss with your broker.
Talk to a specialist broker for support on calculating your practice’s true value. Remember that they have the experience to guide you through your valuation and point out what you might have missed.
For help with your practice insurance or renewal, contact one of the All Med Pro team.