Underinsurance is a widespread issue across Australia in many industries. It’s easy to opt for an insurance policy with less coverage for a lower premium to save you some cash in the short term but this can leave your club or organization with a huge risk, with many insurance holders unaware of their underinsurance until the moment they need to make a claim. It can cause an already dire situation to spiral into disaster very quickly.
Understanding how underinsurance happens and the risks involved can help manage and reduce that risk and enable you to get cover in place that will protect you when disaster hits.
So how does underinsurance happen?
Underinsurance essentially means that your cover is not adequate for your needs. Being underinsured can occur for a number of reasons, including miscalculating the value of your club, players, equipment etc, not accounting for things like labour costs, reducing premiums without careful consideration to save on cost short-term or the rising inflation increasing the cost of repairs.
What could the implications of under insurance to your club be?
Being underinsured means that your insurer can decide to only pay a portion of the amount you’re claiming meaning you could be out of pocket for a large sum.
In 2020, one of our clients, was badly affected by bushfires which ravaged the land and damaged the facilities including buildings, electricals and plumbing. The true loss to the client was approximately -$18,000,000, however they chose a policy which covered only up to $3,000,000 resulting in significant underinsurance.
How to avoid underinsurance?
- Understand the details of your policy; this includes definitions, exclusions etc
- Engage in regular communication with your broker, keeping them in the loop when you make changes to your club, or the value of your club assets change
- Engage a qualified, expert broker. They can help you determine the best cover for you
Disclaimer: General advice and information only
Any advice and information on this website is general only, and has been prepared without taking into account your particular circumstances and needs. Before acting on any information on this website you should assess or seek appropriate financial advice on whether it is appropriate for your needs, financial situation and insurance objectives.