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When discussing care home insurance, it's easy for clients to focus solely on catastrophic events like fires or floods that might lead to a total loss. However, underinsurance can significantly impact claims for smaller issues too, such as a roof repair from wind damage. As your insurance partner, we want to ensure you are fully protected and avoid the pitfalls that can arise from underinsurance.
Underinsurance occurs when the declared value of a building or asset is lower than its actual rebuild cost. This can have serious financial implications, especially when insurers apply the 'average' clause. Unfortunately, many care home operators underestimate how rising construction costs and inflation affect rebuild values. Over the last three years alone, building costs have surged by 15% to 20%.
Many people assume underinsurance only affects claims involving total loss, but that's far from the truth. Imagine you have declared the rebuild cost of your care home as £1 million, but the true value is closer to £2 million. This means you are 50% underinsured. Now, if you were to claim £50,000 for storm damage to your roof, you might only receive £25,000 because the insurer would apply the average clause, leaving you to cover the remaining half.
Underinsurance isn’t just about rebuilding costs, it also threatens a business’s ability to survive a disruption. Many care home operators underestimate how long it takes to fully recover from incidents like fires or floods. Selecting an indemnity period that’s too short can leave businesses exposed to financial gaps, particularly with rebuilding delays, supply chain shortages, and staff retention challenges. If sums insured are too low, insurers may apply reductions to claims, worsening cashflow issues. A generic indemnity period of 24 months is often insufficient, and businesses must carefully assess their risks rather than rely on arbitrary estimates. Without a well-calculated indemnity period, many businesses are left dangerously exposed.
“Such unexpected deductions can strain finances and disrupt operations, something no care provider wants when focusing on resident wellbeing.”
Our goal is to help you avoid these costly scenarios. Regularly reviewing the declared value of your buildings is essential. A small increase in premium could save you tens of thousands in the event of a claim. We encourage you to engage with us in reviewing your valuations. Our team is here to assist and guide you through the process.
While we send out reminders and information via email, conversations are far more effective. We genuinely want to discuss your current nursing home insurance coverage and how we can ensure you are fully protected.
If you haven’t reviewed the declared value of your property recently, now is the time. Let’s set up a call to explore how we can prevent underinsurance from becoming a problem for your care home. Contact us today on 01273 424904, and together, we’ll make sure you’re covered when it matters most.
At Quality Care Group, your peace of mind is our priority.
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