Your Jewellers’ Block policy will include cover for your Buildings however, if your limit is too low, or set to an incorrect value, your business will be underinsured. This can have serious and often devastating consequences for jewellers, including:
- Financial consequences
In the event of a claim, your policy may not operate as intended, delivering less indemnity than needed following a loss. This could ultimately put your business’s ability to recover in jeopardy. - Business disruption
Loss or damage to any of your buildings or stock has the potential to cause substantial business disruption and could lead to long-term negative effects on your business’s reputation. - Legal and contractual issues
In some cases, contracts or lease agreements may require a certain level of insurance coverage. Failing to meet these requirements could lead to legal issues or breach of contract situations, causing additional financial and legal challenges for the policyholder. - Rebuilding challenges
Where the sum insured is not enough to cover the full cost of the claim, insurers can apply the condition of Average. This means insurers can reduce their liability by discounting any settlement by the proportion of underinsurance. For example, the sum insured is 25% less than the total value at risk = claims settlement reduced by 25%. This can hinder the ability to restore your commercial property to its pre-loss condition, impacting its overall value and functionality.
To avoid the negative consequences of underinsurance, jewellers should regularly review their insurance policies with their trusted insurance advisors to assess their coverage needs and adjust their policies accordingly.
What can I do to avoid underinsurance?
In our next article, the David Codling and Associates (DCA) team have drafted their top tips on how to mitigate the risk of underinsurance. Read it here: [Link to next article]