Commercial Property Underinsurance: Values to Review
Commercial property underinsurance occurs when the values or limits selected do not adequately reflect the insured assets and expenses at risk. This guide focuses on reviewing those values. For an overview of the assets to include, read our commercial property cover guide or discuss building and contents insurance with ABS.
What is commercial property underinsurance?
Underinsurance occurs when the declared value of an insured asset or the selected limit is insufficient for the relevant loss. It may arise because replacement costs have risen, improvements were not disclosed, asset lists were not updated or business interruption periods were set too low.
Common areas to review
- Building replacement cost, including demolition, professional fees and compliance costs where relevant
- Contents, stock, machinery, technology and seasonal increases in value
- Rental income or business interruption exposure
- The indemnity period selected for rebuilding or recovery
- Property improvements, new fit-outs and changes to occupancy
Commercial building and contents cover
The scope of commercial building and contents insurance should be reviewed against current asset values, lease obligations and business operations. Property owners and tenants may have different insurance responsibilities, so contracts and leases should be considered carefully.
Construction-related property risks
Renovation, extension works, vacant periods or changes in occupancy can alter the risk profile of a property. Businesses involved in construction should consider the interaction between property cover and work-specific risks. ABS’s construction insurance expertise is relevant where works, plant, contractors or project activities are involved.
Review before a loss occurs
An annual conversation is better than discovering a gap after an incident. ABS Insurance Brokers can help you consider commercial property protection as part of a broader general insurance review. To speak locally, contact an ABS insurance broker in Sydney.
This article provides general information only and does not take account of your objectives, financial situation or needs. Insurance availability, terms, conditions, exclusions and premiums depend on the insurer and your circumstances. Consider the relevant policy wording and seek personal advice before making a decision.
