How to check whether your club underinsured?

The first solution to solving underinsurance is to find out whether your club is underinsured.

At the very least, your insurance should cover the market cost of your club – your sum insured needs to be equal to or greater than the cost of your property as well as the cost of loss of contents. But that isn’t enough. Actually, to avoid underinsurance, you need to take into account the full cost to rebuild and reinstate the premises. This includes: all contents, equipment, building materials, professional fees, outbuildings, debris removal and much more.

So think when was your club last valued, could your club be underinsured?

Costs will change over time – so make sure your valuation is up to date

Inflation is just one of the fluctuating costs to take into consideration. You should also consider any items that might be tricky to replace as the cost of this replacement could be higher than expected.

You should have a maintained inventory of all machinery, equipment and stock stored on your premises and let your insurer know if there are any significant changes that could affect the total you’re insured for.

New regulations and legislations have also come into play. Equipment is now more expensive as newer models will be required by safety regulations, and more eco-friendly materials bumping up costs.

82% of businesses haven’t altered or increased their insurance cover, despite the vast majority of businesses identifying new risks as it grows. As a minimum, arrange a comprehensive building valuation every three years. A professional Chartered Surveyor will be able to help you identify any changes you need to declare.

What happens if you’re underinsured?

Your Sum Insured is the amount you’re insured for. This
takes into account everything – from materials to professional fees. If you
have to make a claim and the valuation turns out to be correct – hurrah!

If, however, the valuation is higher than the Sum Insured,
then your insurer will use Average as a ‘rule’ to calculate your payout.

Essentially, your insurer will pay your Sum Insured divided
by Valuation (minus your policy excess). You’ll then be left to foot the rest
of the bill yourself.

Club X Building Sum Insured £750,000 Reinstatement Valuation £1,875,000

Club X suffers a small fire – the loss totals £10,000

Payment received would be calculated as follows:

£750,000 / £1,875,000 = 40%.

Sum Insured is 40% of the reinstatement valuation so the claim payment would be 40%.

Loss of £10,000 x 40% = £4,000 – policy excess of £250 =
£3,750 paid by insurers.

The club will now need to find £6,250 from their own funds
to pay for the underinsured element of the claim.

Ask yourself how much money you’d be able to upfront to help
keep your club afloat in a crisis. If the answer is not a lot, then you really
must make sure you have a correct valuation.

What is the Average Waiver Guarantee Clause?

For some of Club Insure’s customers, we have arranged
Average Waiver Guarantee Clause. This means that, if the worst happens and the
building suffers loss destruction or damage, the insurer agrees to waive the underinsurance
provision. But only if the insured has had a professional building valuation of
the reinstatement value within the past three years (providing there has been
no subsequent structural alterations or additions). We still do recommend
having a building valuation more frequently, and always alerting us to any
changes. But this clause gives customers additional peace of mind.

For further expert advice, please contact the Club Insure team.