The trade is being caught out by underinsurance!

The rising price of materials and how to avoid falling into the underinsurance trap!

Builders Underinsurance - A-Plan Insurance

At a hugely busy time for builders and the construction industry, we know you won’t want to spend any more time than necessary on paperwork and admin. But what if the impact of not doing so could have a hugely detrimental impact on your business?

It’s worth putting aside some time to ensure you’re protected against a threat that is catching many businesses out across the UK: underinsurance.

What is underinsurance – and how does it affect the trade?

Underinsurance, in general, is when businesses have ‘tick box’ insurance policies in place, but their cover isn’t sufficient for their needs. However, there are many other factors at play which have contributed to making it a national issue this year.

The recent disruption to supply chains has heightened the risk of underinsurance, with a scarcity of essential building materials leading to an exponential rise in costs. 

This new inflation landscape, along with the stress it has induced for many whether at home or self-employed, has been so sudden that it is understandable that many in the trade haven’t considered whether they are still effectively insured for rising costs.

This is also teamed with construction businesses, contractors and sole traders cutting costs and possibly taking out a basic insurance policy that doesn’t cover them adequately. Or they may not notice the small print or seek out any caveats about what is and what isn’t covered. 

This is a huge risk of not using a broker, who is able to explain the ins and outs of your cover in a clear, jargon-free way to ensure you aren’t caught out at the worst possible time.

It’s not just a problem in your line of work. In a recent set of 450 insurance valuation surveys conducted by Barrett Corp & Harrington (BCH), 84% of property owners were also underinsured, with the rebuild costs of a property exceeding their cover. 

In a nutshell, if your premises isn’t effectively covered by insurance, it may not be rebuilt, and your stock may also not be effectively covered. With rents and materials at an all time high, you have to ask yourself, “is it really worth the risk right now?

Avoiding property underinsurance

Let’s start with property, which is an underinsurance hotspot. According to a report by, 9 out of 10 UK properties do not have the correct levels of insurance cover.

So, if you have a business premises, such as a workshop, then ensure it is properly insured. 

It’s worth emphasising that this is based on a rebuild cost, rather than the property’s market value. A building’s rebuild cost could be higher than its market value, as it includes costs such as materials, labour, architect and planning fees.

If you insure your buildings insufficiently by underestimating the rebuild cost, you could end up being underinsured. 

The most accurate way to value your premises is to arrange a Reinstatement Cost Assessment (RCA). In other words, to seek professional help from an expert who will visit the property to estimate its insurance rebuild value. 

It’s normally recommended that this is carried out every three years. But, due to recent events, if you haven’t had this type of assessment done in the last six months, insurance brokers are recommending that this is done now.

What else can you do to ensure your business isn’t underinsured?

For contents, you’ll need an up-to-date inventory of all your business’s contents. Some construction firms have been stockpiling materials to ensure they can fulfil contracts, and to help protect themselves from further price rises.

Unfortunately, many firms have not increased their stock sum insured to reflect the increased value of materials they are holding.

If you have a lot of equipment and depend on it for your day-to-day operations, then it’s especially important to conduct regular professional valuations.

As we reported on earlier this year, tradespeople are still suffering from tool thefts, with statistics showing a tool is stolen every 45 minutes across the UK. Ensure your tools are insured for the right amount. It’s easy to underestimate just how much your tools are worth.

Another key tip is to avoid making assumptions about the insurance cover that a client, hire company or sub-contractor may have in place. It’s always important to check for any gaps in the protection at the start of each project, and be clear about the distribution of responsibilities and liabilities.

If you aren’t sure where to start when it comes to a review, and need a helping hand, you can pop into your local business branch, or give them a call. Our business insurance branch experts will answer any questions you may have about how to ensure your assets are properly valued, and correctly insured as a result.