Reviewing Policy Sum Insured

Are You Getting the Most Out of Your Insurance Policy?

Importance of Reviewing Policy Sum Insured

I’m sure you’ll agree, having insurance in place for your physical asset pool is a necessity. What you may not have considered however is that being under insured can be just as devastating financially as having no insurance at all.

For most businesses, loss or damage to physical assets like buildings, contents, equipment and stock can have a significant impact on business operations. In the event of disasters such as fire, floods or storms, the damage could be so extensive that operations could even come to a grinding halt, leading to substantial loss of income.

For individuals their home and personal contents assets provide security, lifestyle and a roof over their head and that of their family, the loss of which can be devastating both financially and emotionally.

What Happens if You Are Under-Insured?

Unfortunately in many cases when a claim occurs, it is found that the business or individual is under-insured and the sums insured on the policy are inadequate to repair or replace the building, contents and stock.  This leaves the Policy Holder having to call on their cash reserves if available, or taking a loan to pay for the shortfall in repair/ replacement costs to these items.  Dr Allan Manning of The LMI Group, who are specialist insurance claims managers and loss assessors have found with their research with Several Major Insurers that

  • Over 50% of Policy Holders are inadequately insured on commercial buildings, for reasons such as insufficient allowance for Removal of Debris Costs and Extra Costs of Reinstatement to meet current government building codes, regulations and council requirements
  • 47% of Policy Holders are not adequately insured for stock and contents (new for old replacement)


In respect to Personal insurance, Understand Insurance reported that:

  • 83% of home owners and renters are Under-Insured for their Home and Contents
  • Furthermore there are 39% of Householders who risk Under-Insurance, by not updating their Contents policy to cover new possessions, and
  • Two thirds of renters do not have any Contents Insurance compared with only 7% of home owners


Important and Appropriate Steps to Take

The financial and emotional impacts of inadequate sums insured or no Property Insurance, can be devastating.  Therefore, it is important to take appropriate steps to review and update your sum insureds on a regular basis which includes:

  • For Commercial Buildings – Engaging a Qualified Quantity Surveyor to provide a Building Replacement Cost Valuation
  • For Business Contents, Plant and Equipment – Obtain the services of a Qualified Valuer specialising in Contents, Plant and Equipment to value these items for you.  You may also wish to consider creating an inventory of all contents items and obtain their replacement value from suppliers to assist in arriving at an adequate contents sum insured
  • For Stock – A regular stocktake may assist with calculating the value of Stock at hand, including raw materials, work in progress and finished product
  • For Residential Buildings – There are a number of online replacement cost calculators provided on insurer websites and other providers such as from to assist with obtaining building replacement valuations.  A Quantity Surveyor and Builder can also assist with providing a replacement cost Valuation
  • For Residential / Personal Contents – We suggest creating an inventory of your contents with their replacement value.  A number of insurers have Contents Calculators on their websites to assist with calculating a sum insured including other providers such as from .  Be sure to take into account valuable items such as jewellery, artworks, antiques, collections or other valuable possessions.  It is recommended to obtain valuations for these items from a professional valuer, and check your policy coverage for these items, as limits apply and they may need to be specified on the policy


Get Help You With Your Policy

We are able to assist you in providing contact details of Quantity Surveyors and Valuers that may be able to assist in arriving at an adequate sum insured for your commercial and personal buildings and contents.

Please contact our Advisers to discuss any changes to your policy sums insured or if you require a quotation on a Commercial or Residential Property, that you currently have insured elsewhere.