We hope that the following "tabs" will help understand certain aspects which are relevant to your policy:
"How much do I need to insure my business contents and equipment for?"
You must insure all for the full replacement value. If you imagine that you had to replace all of your equipment today because it’s been completed destroyed in a flood or a fire at your premises then your policy needs to have an adequate sum insured (amount of cover) that is sufficient enough to replace all of your equipment at today’s prices.
If you don’t do this then your Insurer would have the legal right to invoke an insurance clause that’s referred to as an "Average Clause" and which would allow them to proportionately reduce the amount paid in settlement of a claim.
"When I bought my surveying equipment I negotiated a good discount with the supplier so I only need to insure the amount paid which includes the discount".
For insurance purposes you should ignore any discounts obtained when buying your equipment. The reason for this is because a discount may be unavailable when you need to buy replacement equipment following loss. Therefore, if you have set a sum insured that includes the discount you could be underinsured and have an inadequate sum insured.
You must insure your equipment for the full replacement new value ignoring any discount that was agreed.
"When I insure my equipment does my sum insured need to include VAT?"
This very much depends on your VAT status. If you are registered for VAT then you do not need to include VAT when calculating your sum insured. This is because the VAT amount can be reclaimed in the normal way as part of your VAT returns.
If you are not VAT registered then you must add the VAT percentage to your sum insured. Your Insurer will pay for the VAT cost as part of your claim.
In the event of a claim:
- Insurers will not pay the VAT amount if you are registered for VAT.
- Insurers will pay the VAT amount if you are not registered for VAT.
Consequences of Under Insurance?
Insurance policies that are designed to cover property, contents and equipment normally contain an Average Clause which affects the way your cover applies and which we have explained as follows:
The Average Clause
The condition of average is the insurance term used when calculating settlement of a claim when the property insured at the time of the loss is of greater value than the Sum Insured. In the event of a property insurance claim, the amount payable is limited to the sum insured noted on the policy. The sum insured provided by the Policyholder is the declared value used to determine the premium applied to the policy.
If, when taking out a policy, you under-estimate the value of the property, the property will be under-insured. A condition set by an insurer under the terms of a policy states that if the insurance value of a property at the time of loss or damage is less than it’s real value, payment by insurers will be reduced according to the difference. Insurers will limit their liability by applying what is known as the ‘average clause’.
In effect, this means that you will be deemed to be the insurer for the amount of any under-insurance at the time of any loss, and even partial losses may be shared in proportion to the amount of under-insurance.
The intention is that everybody pays a premium based on the full value at risk. The formula used to calculate a claim payment subject to the average clause is as follows:
TRUE VALUE AT RISK
For example, equipment with a replacement value of £50,000 but insured for only £40,000 is 20% underinsured. If the equipment is stolen and the cost of replacement is £50,000, insurers could reduce the claim by 20%. This means the Insured only receives £36,000 from Insurers, leaving a shortfall of £24,000.
A typical Condition under a standard Commercial Policy Wording is shown below:
Where a Sum Insured is stated to be subject to average, this means that if at the time of Damage, the Sum Insured is less than the total value of the Property Insured, You will:
- (a) be responsible for the difference
- (b) bear a proportionate share of the loss
Security requirements in relation to Theft cover
Equipment when it’s removed from your premises:
When you go to work, to site or overnight when you are away on business, Insurers will expect you to take all reasonable precautions to prevent a loss of your equipment occurring.
Thefts from unattended vehicles are a major problem for Insurers because of the ease in which theft losses can occur. For theft cover to apply, Insurers will expect you to do certain things to manage the risk of theft as far as possible.
For example, Insurers will only provide Theft cover when your equipment is "concealed out of sight" and "all protections" fitted to the vehicle are in "full and effective" operation at all times. Theft cover will normally be restricted to certain times of the day with cover only applying between 6.00am and 9.00pm. This is very common so you would be required to remove all of your equipment from your vehicle for overnight safekeeping in a locked premises e.g. your home, office or hotel room.
Don’t be tempted to load your vehicle the night before an early morning start the next day
Parking your vehicle when it’s loaded with equipment on your driveway at home does not alter or improve the theft risk from Insurers side of the fence. Just because your vehicle is parked on the driveway of your home does not substantially reduce the risk of theft because Insurers do not view this as a positive improvement in your risk. Your equipment is still in a vehicle overnight which is too great a risk for them to insure. It may actually make the risk worse because if your vehicle is stolen with everything inside then the Insurer would face a total loss. For this reason, if your vehicle is broken into or stolen from your driveway then the same principle applies and you would not be insured for overnight theft cover. If criminals know what you do for a living and where you live then they may specifically target your vehicle at home.
Sometimes there may be acceptable alternatives. If flexibility is required, we may (after discussing your individual requirements) be able to negotiate an acceptable solution with Insurers for you.
Unattended Vehicles – A minute can be too long!?
At some time or another, we have all left our vehicles unlocked and unattended for a few minutes, either at a Petrol Station forecourt or in a Pay & Display car park. However, if you have equipment in your vehicle you will invalidate your Theft cover if your equipment is grabbed and stolen when it’s unlocked. Even in the circumstances, if you have failed to lock your vehicle an Insurer is very likely to decline a claim on the grounds that you have not taken "reasonable precautions" to protect your equipment by ensuring that your vehicle’s protections were in "full and effective" operation when it was left unattended, even if only for a few minutes. Ensuring that your vehicles protections are in "full and effective" operation is a condition of Theft cover.
Car Park Ticket Machine Scams
There are known "theft scams" operated by criminal gangs in car parks across the UK. Pay & Display Ticket Machines are deliberately vandalised so that vehicle owners who have parked near to a ticket machine unaware of the problem and expecting a short walk to use it then establish that the ticket machine isn’t working meaning that they have to make a longer walk to another machine, meaning they have left their vehicle unattended and, potentially, innocently unlocked. Criminals use this as a window of opportunity to quickly gain access to an unlocked vehicle stealing its contents before you return from the ticket machine! Even though the circumstances were deliberately conspired against you and you innocently left your vehicle unlocked, an Insurer would be entitled to decline cover because you did not take reasonable precautions by ensuring that your vehicles protections were in "full and effective" operation when it was left unattended.
Try and stay off Criminals radar
It always good to promote your business with signage on your car or van but please do be aware that this is also an advert to criminals that your vehicle may be carrying high value equipment inside. Your signage makes it easier for them to identify what you do for a living so that they can better target you for theft. If your vehicle is free from signage then you are likely to be more anonymous from criminals and attract unwanted attention.
Business Premises Minimum Security Requirements
Insurers like to know that your premises are safe and secure when left unattended and will insist that minimum standards of security are complied with at all times. If a minimum standard of security endorsement applies to your policy, this will be clearly detailed in our quote and the policy documentation. It is extremely important that you understand what the minimum standards of security are so that you can comply with them. It is common practice for Insurers to require certain locks to be fitted to your doors and windows and in some cases they may even require installation of an Intruder Alarm. Common security requirements include the following:
- a five lever mortice deadlock (to BS3621) fitted to the main external doors
- hinge bolts (where the hinges are exposed on the outside of the door)
- rack bolts to top and bottom
Opening windows on the ground floor or accessible (e.g. via a flat roof): key operated window locks.
Prove your claim!
In the event of a claim, your Insurer will expect you to provide proof that the equipment existed by way of an original purchase receipt to support your claim. You will also need to provide a quote to repair the damaged item or to replace the equipment if it is beyond economical repair.
If you need to hire replacement equipment so that you can continue to work then you will be expected to mitigate your loss.