Have you reviewed your business sums insured?
If Not, you could be in for a surprise at claim time
When was the last time you reviewed your business property insurance? If it’s been more than a year, you’re not alone—but you may be unknowingly putting your business at risk.
According to the 2025 VERO SME Insurance Index, a staggering 58% of SMEs interviewed are not reviewing their sums insured annually, and 67% are not concerned about underinsurance.
These figures are concerning, especially when you consider the financial consequences of getting it wrong at claim time.
Why Does This Matter?
Business asset values aren’t static. Your company might be growing. You could have purchased new equipment, upgraded your premises, or expanded your services.
Even if none of these changes apply, rising inflation alone has significantly increased the replacement cost of assets—from building materials to machinery.
When your insurance coverage doesn’t keep up with the current value of your assets, you risk being underinsured. And that’s where the co-insurance clause kicks in.
What Is Co-Insurance?
Most commercial property policies include a co-insurance clause. Put simply, if your assets are not insured to their full reinstatement value, the insurer can reduce your claim payout in proportion to the level of underinsurance. This means:
You may not receive the full amount you expected, and the financial shortfall could be significant.
What Is the 80% Coinsurance Clause?
Most insurance policies require you to insure your property for at least 80% of its full value. This is known as the 80% coinsurance rule. If you insure it for less than that, you may not be fully covered when a loss happens.
🔍 Example:
- True value of property: $1,000,000
- 80% of value: $800,000
- Insured for only: $500,000
- Damage: $450,000
Because $500,000 is less than the required $800,000, the insurance company won’t pay the full amount of the loss.
💡 How the Payout Is Calculated:
Payout = (Insured Value ÷ 80% of True Value) × Loss
= ($500,000 ÷ $800,000) × $450,000
= 0.625 × $450,000 = $281,250
So, instead of getting $450,000, you only get $281,250 — leaving a shortfall of $168,750.
How Can You Be Sure You’re Covered Correctly?
The best way to have peace of mind is to get a professional valuation of your business assets and property. This ensures your sums insured reflect the true cost to replace or reinstate your property in today’s market.
As your insurance broker, we can assist in organising a professional valuation and reviewing your policy to make sure it’s fit for purpose.
Don’t wait until claim time to discover you’re underinsured. Let us help you stay protected—reach out today for a policy review.