In the fast-paced world of the motor trade industry, it's easy to overlook the importance of having adequate insurance. Underinsurance, a situation where you don't have enough insurance cover to meet your needs, is becoming increasingly common due to factors such as increasing labour costs, supply chain issues and rising material costs.
The Cost of Replacing Your Assets
One of the most critical aspects of ensuring adequate insurance cover is accurately assessing the current replacement cost of your stock, workshop equipment, tools, plant, diagnostic equipment and other contents. It's crucial to regularly review the value of customers' vehicles in your possession and ensure that your insurance reflects the true maximum value of all vehicles at any given time. Failure to do so could result in a significant shortfall in the event of a claim.
The Importance of Building Reinstatement Cost Assessments
For motor trade businesses with showrooms or workshops, it's essential to have a professional assessment carried out periodically to ensure that your Buildings Sum Insured is adequate. This assessment takes into account factors such as rebuilding costs, demolition costs, site clearance costs and potential planning delays. By working with insurance professionals, you can review your buildings insurance policies and ensure that you have the right level of protection in place.
Business Interruption: Preparing for the Worst
In the event of a major claim, it's crucial to be realistic about how long it could take your business to recover - back to the level before the loss occurred. Factors such as rebuilding, site clearance, planning delays, availability of plant, machinery & replacement contents and the time needed to regain lost customers who may have turned to competitors during the downtime must be considered. By assessing these risks in detail and determining an appropriate indemnity period, you can minimise the financial impact of a major disruption to your business.
The Consequences of Underinsurance
The crux of the matter is that underinsurance leaves you at real risk of having a significant shortfall to pay should you need to make a claim. This can be devastating for motor trade businesses, as it can lead to financial strain, reduced profitability and even closure in extreme cases.
In the motor trade industry, having adequate insurance coverage is not a luxury - it's a necessity. By understanding the risks of underinsurance and taking proactive steps to ensure that your business is adequately protected, you can safeguard your assets, minimise financial risk and focus on what you do best: serving your customers and growing your business.
