Value at Risk – Is your home or business underinsured?

Decisions relating to Value at Risk are highly important and often an overlooked aspect of any insurance cover. Guessing at or overlooking your businesses value at risk will lead to underinsurance and potential business closure in the event of unforeseen circumstances such as flooding, fire or burglary.

So, what is value at risk? Value at risk deals with the insurable value of your assets, it measures the areas of buildings and quantifies the content of machinery, stock and computer equipment. It also measures the loss which a business would incur if closed due to a disaster, otherwise known as Business Interruption cover in your policy.

If you can confidently look at your business and know that you have all these figures correct on your insurance policy then you are in a very good position when it comes to making a claim. However, you are also in the minority.

According to Sean Cleary of Cleary’s Loss Assessors, underinsurance is the biggest problem with commercial insurance plans worldwide. He recommends that every business should carry out a value at risk survey at least once every five years. A value at risk survey will give business owners the correct values to insure and eliminate a shortfall in claim settlement due to underinsurance. The survey may also save money for your business as over insurance can lead to a waste of premium.

With over 25 years experience in settling claims for business, Cleary’s have come across the problems caused by underinsurance far too often. Many claimants experience firsthand how disaster and the repercussions of a disaster is the catalyst for discovering that their policy was incorrectly structured with the sums insured being inadequate for the losses incurred. Cleary’s have also been carrying out value at risk surveys for over 25 years and rarely find a business which has its optimum insurance cover.

A value at risk survey is a highly technical procedure which is carried out by trained and experienced professionals. It gives a business an updated asset register and shows the calculated reinstatement value for all assets including buildings, machinery, stock, contents and loss of profits. The survey will also point out areas where cover may be insufficient or unnecessary and identifies insurable interests, for example, a building may be held in private ownership where stock and machinery may be held in company ownership, therefore the company policy will not pay for the property owned privately and vice versa.

Due to the detail involved and the technical nature of a value at risk survey, it is unreasonable for you to expect a broker to take full responsibility for one’s sums insured. It is up to the business owner to have this assessed professionally. Any business owner can now visit www.clearys.ie and download a free information booklet explaining the importance of value at risk. With the current economic climate and given the tightening of credit terms, it has never been more important to ensure that you are adequately covered. It is a gamble that few can afford to take.