The dangers of being under-insured

Insurance in one of those things that you know you need to have and hope you will never need to call upon.  When you do need your insurance to respond, it’s important that you are not nder-insured.

You may have cover in place to protect you in case of loss or damage to your property, injuries to your employees or volunteers and even an injury to a third party or damage to their property caused by you or your organisation’s activities.  But how do you know if you’ve got enough cover?

Your insurance premium is worked out by insurance companies to reflect the value and nature of the risk in question.  This is often partly based upon the facts and figures that you provide, which is why it is so important to give the right information.

You can find yourself under-insured if you:

  • do not correctly assess the right amount of insurance you need
  • are unsure as to what a sum insured or limit of indemnity is or how to figure out what they should be for your organisation.
  • do not select a suitable indemnity period for any business interruption cover
  • have not obtained up to date valuations or kept your sums insured under review every year
  • fail to appreciate that sometimes, standard limits just aren’t enough.


One of the hardest things to provide your insurer with is a building sum insured.  This is not just the market value of the property but the amount that it would cost to rebuild the building and replace any fixed contents.

When working this out, you should remember to consider the cost of the following:

  • Materials and labour (availability and accessibility of materials and labour in some areas may be limited which could extend costs)
  • Architects and surveyors fees and legal fees
  • Demolition and removal of debris (N.B this could be significantly increased where asbestos is involved)
  • VAT
  • Any planning, local authority regulations, legal requirements and increasing costs (such as inflation) that occur during both the policy period and any rebuilding period.

It is also important to note that if you have a listed building or building with special features, that the rebuild cost may be slightly higher due to the difficult nature of the rebuild.


Here at Edwards Insurance Brokers, we always advise that you seek a professional valuation of your property to make sure that your sums insured are accurate and up to date.  However, if you need any further advice on how to find the right information to give to insurers, give us a call on 01564 730 900.