Underinsurance is a common problem in the motor trade industry, where businesses often struggle to obtain adequate coverage for their vehicles, equipment, and premises. Underinsurance occurs when a business fails to insure its assets for their full value. As a result, this can leave the business exposed to significant financial losses in case of an accident or incident. In this blog, we will discuss underinsurance in the motor trade industry
and its effects.
Causes of Underinsurance:
- Inaccurate Valuation
- The value of vehicles and equipment can change over time, and businesses may not keep up with these changes when renewing their insurance policies.
- Ignoring Upgrades
- Businesses may fail to update their policies to include upgrades or modifications to their vehicles and equipment, which can lead to inadequate coverage.
- Failure to Account for Business Interruption
- Motor trade businesses rely on their assets to generate income. However, they may fail to consider the impact of business interruption on their revenue in case of an accident or incident.
Effects of Underinsurance:
Underinsurance in the motor trade industry
can have significant effects, including:
- Financial Losses
- Inadequate insurance coverage can result in significant financial losses for businesses. For example, if a business insures its vehicles for less than their actual value, it may not receive enough compensation to cover the cost of repairs or replacements in case of an accident.
- Legal Consequences
- Underinsurance can also lead to legal consequences. If a business is found to be underinsured, it may be held liable for damages and compensation.
- Difficulty in Obtaining Coverage
- Inadequate insurance coverage can also make it difficult for businesses to obtain insurance coverage in the future. Insurance companies may view the business as a high-risk client, which can result in higher premiums or coverage exclusions.
- Damage to Reputation
- Underinsurance can damage the reputation of the business. Therefore customers may view the business as unreliable, which can result in a loss of business.
To prevent underinsurance in the motor trade industry, businesses should:
- Regularly Review Coverage
- Businesses should review their insurance coverage regularly and update their policies to reflect changes in the value of their assets.
- Account for Business Interruption
- Businesses should account for the impact of business interruption on their revenue and ensure that their policies provide adequate coverage.
- Get Expert Advice
- Businesses should seek expert advice when selecting insurance coverage to ensure that they have adequate protection.
Underinsurance is a significant problem in the motor trade industry. It can result in significant financial losses, legal consequences, and damage to the reputation of the business. To prevent underinsurance, businesses should regularly review their coverage, account for business interruption, and seek expert advice. By doing so, businesses can ensure that they have adequate protection for their assets. Also they can avoid the negative consequences of underinsurance.
If you have any issues in regards to underinsurance, feel free to get in contact with us at Ascend, as our aim is to discover a solution to your problems.
More related blogs:
Guide to Motor Claims Inflation
Consider self insurance for your motor fleet – selfinsuranceprotect.co.uk
Disruption in supply chains for Motor Trade
Any questions? Please don’t hesitate to contact one of our team.
Steven.Gillespie@ascendbroking.co.uk| Telephone: 01245 449 060