Are you insuring yourself, without realising it?

Are you insured, yes or no?

Many insurance policies have what is known as a co-insurance clause.

In simple terms, what it means is, that in the event of a claim, if your property or business is under-insured, or not insured for it’s full value, the insurance company can discount your claim.

This can happen even if you have a partial claim.

According to leading insurance industry figure Dr Allan Manning over 70% of Business Interruption policies could be impacted by under insurance.

Here’s an example of how it works.

If a business had a sum insured for gross profit of $500,000 when the actual insurable gross profit of the business was $1,000,000 on a policy with 80% co-insurance; and the loss was $200,000, the claim would be adjusted as follows:


            Declared Value                   x        Loss             =      Insured Loss

Value at Risk x Co-insurance


i.e.         $500,000                           x      $200,000       =      $125,000

$1,000,000 x 80%

This means the uninsured loss (reduction in claim) would be $75,000.

This is an example of why the role of the insurance broker is so important. A small saving in premium can have a large cost in the event of a claim. Many business policies also fail to have a long enough Indemnity Period and cover for increased cost of working.

To have your insurance program checked contact one of our brokers.

*The above example was provided by Dr A Manning of LMI Group.





Back to larger map