Ten Reasons you could be Over Insured
In today’s hard insurance market, where insurers are seeking to rebalance premium to loss ratios or limit policy terms, it is more important than ever to ensure that you are adequately, yet not over, insured.
Even when producer prices and building material costs are rising, there are a number of reasons why replacement/reinstatement costs may be lower than your current declared values under your property damage insurance policy including:
- Original costs not accurately reflecting current replacement costs
- Historic costs not accurately reflecting insurable assets
- Technology or process improvements may have reduced costs
- Changes in supply chains could lead to reduced reinstatement costs
- Changes in infrastructure could allow for rebuilding to be carried out cheaper compared to the original construction
- Increased competition among suppliers/contractors may have driven down margins and overall contract prices
- Your current declared values may include an allowance for escalation costs, and this could be too high
- If your sums insured are based on internally prepared values, they may include for elements that do not need to be included in declared values
- Volatility in commodity prices in recent years can mean that past costs may have little bearing on current replacement values
- There may be no need to insure current facilities on a like-for-like basis.