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Avoiding the risk of underinsurance

Did you know 19% of businesses haven’t reviewed their indemnity period in the last two years? Despite this, 91% of SMEs believe they have the right level of cover in place*.

What is underinsurance?

If your business is underinsured, your company’s assets are being insured at less than their true worth, leaving you inadequately protected. Therefore, in the event of a disaster, you would be compensated for less than the true value of your loss.

That’s not what you want to hear when you are making a claim

How could I be underinsured?

Companies can be underinsured for many reasons. For example, employers might think that a major loss will never happen to them, so they don’t buy appropriate cover. But a single loss event, whether it be a cyber attack or a natural disaster, can ruin any organisation.

Don’t run the risk of underinsurance.

Top tips to avoid underinsurance

Follow these 6 tips to take the steps to ensure your business has adequate cover to defend against disaster.

  1. Conduct regular, accurate valuations of your business, property and contents. Consider having a professional assist you in this valuation process to ensure you have the correct sums insured and cover limits in place. If you haven’t done this in the last 12 months, consider doing so!
  2. Provide the cost of rebuilding your business property to your insurer rather than the market value or the amount you purchased it for. Read our article to understand more about rebuild costs and what it means for you
  3. Calculate and use your actual total revenue, so that the insurer has a true understanding of the size and shape of your business.
  4. Determine an appropriate indemnity period that allows your business sufficient time to recover after a loss event – doing so can help protect your business operations, your income,your cash flow and your profit.
  5. Increase your sums insured to reflect inflation – supply chain delays and labour shortages are impacting all sectors and
  6. Review your policy wording to ensure you have the broadest cover possible. Update your policy whenever you make any changes within your business or potentially risk being left exposed


*Figures relate to a survey of 502 micro, small and medium sized business, carried out by YouGov on behalf of Aviva in September 2022.