Here’s a worrying fact for you, seven in 10 business owners said that new risks have emerged since they first started their company, and an astonishing 82% of them have not altered or increased their insurance cover*. If the risks to your vineyard increase and your levels of cover do not, you will be under-insured.
What is under-insurance?
Under-insurance is when the amount of insurance cover is less than the actual value of what is insured. For example, a building that you use to host wine tasting events in is valued at £60,000 but is only insured for £40,000, in this instance you are under-insured due to only paying for a percentage of the buildings value.
How can you avoid being
As a vineyard owner, you need to fully understand the value of your business assets before taking out your insurance; your broker can talk you through everything. While in some cases under-insurance can be deliberate and as a result fraudulent; often it is simply the result of misunderstanding the value of buildings and what they contain, this won’t necessarily help you when you come to claim though!
In the event of serious damage to your property, e.g. a major fire, the ‘extra’ costs around a rebuild are quite often forgotten until it is too late. Be sure to think about the items below when arranging your cover:
- The removal of debris
- Architect fees
- Surveyor fees
- Consulting fees
- Legal fees, and
- Anything else that could be involved in the costs of a rebuild
You can minimise your risk of under-insurance by pencilling in a regular health check of your policy, either independently or with your broker.
Despite the consequences for policy holders, under-insurance is still so common, with some claims professionals reporting that up to 89% of their customers are under-insured!*
We advise you to check the policy schedule in your insurance documents and see if you feel you need to adjust the amount of cover you need. If you have any questions concerning your current insurance limits, your broker will be able to help you.
What happens if you come to claim and realise that your vineyard is under-insured?
If you discover in the event of a claim that you are under-insured, then in most cases ‘average’ will be applied.
‘Average’ is a term used by insurance providers to describe the amount that will be paid in the event of a claim, where the value of the claim is higher than the amount originally insured for.
Premiums are calculated on the values you’ve selected for what is being insured. If this is less than the actual replacement value, then you will have underpaid on your insurance. ‘Average’ means the insurer will reduce any claim settlement to recognise the premium they haven’t collected.
As an example, if an insurance policy covering a building is insured for £75,000 but at the time of a loss the real insurance value is found to be £125,000; then the proportion of ‘average’ would be £75,000/£125,000 or 60%. Therefore you will only receive 60% of any loss you suffer.
The takeaway point is to always seek advice to ensure that your vineyard is adequately covered so that if the worse was to happen, you can resume business as soon as possible. You may also wish to consider taking out a Business Interruption policy to protect you against loss of income following damage to your vineyard caused by an insured peril such as a serious fire, flood or similar incident.
*Sources: Insurance Business UK, Dec 2016 & Insurance Hound, Dec 2017