Is your sports club underinsured?
Underinsurance is on the rise. Unfortunately it’s only when you need to make a claim does the hidden risks of Underinsurance come to light and it’s all too late to avoid the dreaded pitfalls of being Underinsured.
What is over and Underinsurance?
Over insured means you’re paying too much, but underinsured means you’re not covered enough for example the cost of rebuilding your clubs property, contents or equipment which can hit your business much harder, leaving you covering the remaining cost of a shortfall yourself.
What is 'Average Clause'?
Should you find your sports club underinsured, in the event of an insurance claim your insurer can reduce your claim pay out by the percentage you’re underinsured by. Meaning a claims settlement could be reduced by thousands (and sometimes millions) of pounds, leaving you to fund the difference.
Sports club example of 'Average Clause'.
If you’ve only insured your sports club building for £500,000 and the rebuild cost is calculated at £1,000,000, you would have insured your sports club building for only 50% of what the true rebuild cost would have been. Should the unthinkable happen and you need to make a claim for a total loss for example a fire, or even for minor building damage claims, your insurer will only pay out a partial payment of what it would cost to rebuild. In this instance, 50% would be paid out as the building wasn’t insured for the correct amount. We call this the dreaded 'Average Clause'!
How can my sports club be Underinsured?
Premises Market value: A common mistake is insuring what the building would sell at market value, rather than its true reinstatement cost to rebuild the property from scratch.
Index linking: Index linking cannot accurately reflect a true rebuild cost, many rely solely on index linking each year for their property insurance and not taking into account for regional trends site clearance, survey costs, architect, legal and planning fees and the cost of labor and materials.
Automatically renewing: Your sports club is your biggest asset. When was the last time your sports club was reviewed? Renewing an insurance policy every year without reviewing the levels of cover is a common misconception leaving gaps in cover. Many changes can happen during the course of a year such as property extensions, alterations, increased contents and equipment. These can all impact the true reinstatement cost. Reviewing your insurance policy each year with an insurance broker can help to identify gaps of cover in your insurance.
Mid-term changes: If changes or alterations/extensions have been made before your insurance renewal date you should advise your insurer as soon as these changes are made rather than waiting for your renewal to avoid gaps in cover.
Out of date property valuations: A true reinstatement cost for a property should be by a qualified building surveyor to help avoid a shortfall in cover.
Insufficient business interruption: Recovering from a total loss such as a fire or flood can be a lengthy process and may take longer than you think to rebuild from scratch with some cases as long as 24 months. Having your property surveyed by a quality survey engineer can give you an estimated rebuild period, which helps you calculate a more accurate Business Interruption sum insured.
Insurance market: As the insurance industry has changed significantly over the past few years from a hardening insurance market, Brexit, to Covid-19 and increased energy and fuel prices, businesses are under severe financial pressure, resulting in opting for decreased cover to limit insurance costs.
Our expert sports club team can help.
At Higos, we understand the unique risks your sports club can face. We’re always looking for ways to improve our service and help protect you and your business from the increased risk of Underinsurance. Our, knowledgeable, specialist in-house sports club insurance team will take the time to get to know you and the nuances of the sports club you manage. We’ll review your insurance needs and assess any gaps in cover to help avoid being underinsured.
Our sports club property rebuild cost assessment solution.
We understand that no two business premises or their rebuild costs are ever exactly the same. So to help put your mind at rest we can provide our cost effective Rebuild Cost Assessment (RCA) report which is ‘Regulated by RICS’ (Royal Institution of Chartered Surveyors) to help ensure your sports club building is thoroughly protected. Our Rebuild Cost Assessment (RCA) report is a desk based assessment or site visit and can also include an estimated rebuild period, which can help you calculate more accurately for Business Interruption, leaving you with a huge amount of value and protection.
Underinsured, over insured? We’ll let you know
If you’re interested in speaking to a chartered insurance broker to help protect your sports club from underinsurance get in contact with us at Higos. Alternatively fill out our online request a call-back form and a member from our specialist commercial insurance team will call you back.
Get in touch
For sports club insurance advice or a quotation