The sum insured on a property policy is the most an insurer will pay for that item. If it is set too low, you carry the shortfall. Many property policies also contain provisions that can reduce a claim when the property is significantly underinsured, even for partial losses.
Replacement is not market value
The cost of rebuilding a commercial building includes demolition and debris removal, professional fees, compliance with current building codes and the cost of materials and labour at the time of rebuilding. That figure can differ markedly from what the property would sell for.
Signals it is time to review
- You have not reviewed sums insured in more than two years.
- You have renovated, extended or refitted.
- Your stock levels or equipment have grown.
- Building costs in your area have risen.
- Your building is older or heritage-listed, where specialist trades may be needed.
Getting a reliable figure
For larger or more complex buildings, a professional insurance valuation is often the most dependable approach. For contents and stock, an up-to-date asset register is the best starting point. Your broker can help you work through both.