Free tool for brokers
Show your client what underinsurance costs
Put in the sum insured and the real value. See the claim, the payout and the gap in dollars, then send it as a branded PDF. Free, no login.
Example figures. Change them to your client's.
1What are you checking?
Declared value against the cost to rebuild
2The numbers
3The clause in the policy
Insure for at least the set share of the value (often 80 or 85%) and claims are paid in full. Below it, they shrink.
Your client would be paid $1.65m of a $2m claim.
$353k short (17.6% of the claim)
- To be paid in full, the sum insured needs to be at least $8,500,000 ($1.5m more).
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What to tell your client
If you had a $2,000,000 claim on your building, the policy would pay about $1,647,059. That is because the sum insured is below the $8,500,000 the policy expects, so every claim is paid in proportion. You would cover the other $352,941 yourself. To be paid in full for a claim like this, the sum insured needs to be at least $8,500,000.
Illustrative only. It shows the arithmetic of a typical clause; the policy wording decides what is paid. Not advice. Nothing you type leaves your browser unless you make the PDF.
Why it matters
Most commercial clients are short. Few of them know it.
42%
of small businesses review their sums insured every year. The rest are guessing.
Vero SME Insurance Index, 20253 to 5
years between professional valuations is what the Insurance Council and NIBA recommend.
ICA and NIBA averaging fact sheet, 2026
Co-insurance in plain English
Three ways to explain it to a client
Clients rarely read the averaging clause. These pictures do the work.
You only get your slice
Insure a $10m building for $6m and the insurer treats you as carrying the other $4m yourself. On every claim, you get your slice.
The ladder has to reach
Co-insurance sets a rung, often 85% of the value. Reach it and claims are paid in full. Fall short and the claim shrinks in proportion.
Inflation leaks out of the sum insured
Building costs rose by about a third in five years. A declared value that was right in 2021 can be well short today without anyone touching it.
Worked examples
The same fire, three outcomes
Real arithmetic from the calculator above. Change the numbers there to try your own.
Example 1
80% co-insurance, insured at 70%
A warehouse worth $1m is declared at $700k. A $200k fire. The clause wants $800k, so the claim is paid at 7/8.
Paid $175k of $200k
Example 2
85% co-insurance, right on the line
Declared at $850k on a $1m building. The same $200k fire is paid in full.
Paid $200k of $200k
Example 3
Stock short by 30%
Stock and plant worth $1m insured for $700k under an 85% clause. A $400k loss pays $329k.
Paid $329k of $400k
Business interruption
The gap that hurts more than the fire
Buildings get rebuilt. A business that runs out of money while it waits does not reopen. BI is where clients are shortest, and it needs no valuer: the numbers are in their accounts.
Insurance gross profit
- Turnover
- + closing stock
- minus opening stock
- minus costs that stop when trading stops
- = insurance gross profit
12 month indemnity period, 18 months to recover
Insurance gross profit is not the accountant's
Only the costs that stop when trading stops come off (usually purchases and some freight). Wages, rent and loan repayments keep running, so they stay in.
The indemnity period has to outlast the recovery
Rebuild, refit, win the customers back. If that takes 20 months and cover runs for 12, the last 8 are on the client, whatever the sum insured.
Grow it for the year ahead
The sum insured covers the gross profit the business would have made during the indemnity period, so allow for growth and for periods over 12 months.
A stale valuation
Last valuation 2021? It has gone backwards since.
The calculator can carry an old valuation forward with the ABS producer price index for non-residential building construction. It is the same idea as the escalation an ISR policy applies, and it is a good first check. It cannot fix a valuation that was wrong to begin with.
When to send them to a valuer
No valuation in five years, extensions or a change of use since, heritage or specialist buildings, or a mixed site. Demolition, removal of debris and professional fees are often left out too, so ask.
The rules in Australia
What the law says about averaging
- 1
It must be disclosed in writing
Under section 44 of the Insurance Contracts Act 1984, an insurer can only rely on an averaging clause if the client was clearly told in writing about it and how it works before the contract was entered into.
Insurance Contracts Act 1984, s44 - 2
The 80% floor is for home policies only
For home buildings and contents, the Act stops any average when the sum insured is at least 80% of the value and limits the cut below that. Commercial policies have no such rule: the threshold is whatever the wording says, so check it.
- 3
ISR declared values carry the risk
Under most ISR wordings the client declares the values. If they are short, the co-insurance clause applies to every claim, large or small.
For your client
A one page explainer with your logo on it
Turn the result into a branded PDF in about a minute. Your client sees their own numbers, a simple chart and what to do before renewal. You keep a record that you raised it.
- Your logo and details
- Their claim, payout and gap
- A chart they will understand
- What to do before renewal
- A plain English note on the clause
Is your property insured for enough?
If you had a $200k claim today, the policy would pay about $175k.
Before renewal
- ☐ Get a professional valuation
- ☐ Review the indemnity period
- ☐ Check the co-insurance clause
FAQ
Questions brokers ask
- Is this advice?
- No. It shows the arithmetic of a typical clause so you can explain it. The policy wording decides what is paid, so check the threshold and definitions in the client's wording.
- Which co-insurance threshold should I pick?
- The one in the wording. 80% and 85% are common in ISR policies, and some insurers use 90%. Some waive averaging when an approved valuer set the declared values.
- Can it tell me what a building is worth?
- No, and nothing online should. It can bring an old valuation up to date with the ABS building cost index, or show what happens if the value is 10, 20 or 30% higher than you think. For a real figure, use a valuer.
- What is insurance gross profit?
- Turnover plus closing stock, minus opening stock, minus the costs that stop when trading stops. It is usually much higher than the gross profit in the accounts, which is why BI is so often short.
- How long should the indemnity period be?
- Long enough to rebuild, refit and win the customers back. For most commercial premises that is more than 12 months: think about planning, builder availability and lead times for plant.
- Does it store my numbers?
- No. The calculator runs in your browser. If you make the client PDF, the figures go to Coverbound to build it and are deleted after 7 days unless you start a free trial.
- What does Coverbound do?
- Coverbound is the workspace for commercial brokers: client questionnaires, submissions, quote comparison, renewal reports and documents with e-signing, built for Australia and the UK.
With a free trial
Check every site on the schedule, and do it again at renewal
Coverbound keeps the figures with the client, reminds you before renewal and turns the result into a renewal report. 14 days free, no card.
One conversation now saves a hard one at claim time
Run the numbers with your client, send the PDF and get it on file.