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 pounds, then send it as a branded PDF. Free, no login.
Example figures. Change them to your client's.
1What are you checking?
Sum insured against the rebuild cost
2The numbers
3The condition in the policy
Insure for 60% of the value and every claim is paid at 60%, even a small one.
Your client would be paid £1.2m of a £2m claim.
£800k short (40% of the claim)
- To be paid in full, the sum insured needs to be at least £10,000,000 (£4m more).
Got a schedule of sites? Check every one with a free trial
What to tell your client
If you had a £2,000,000 claim on your building, the policy would pay about £1,200,000. That is because the sum insured is below the £10,000,000 the policy expects, so every claim is paid in proportion. You would cover the other £800,000 yourself. To be paid in full for a claim like this, the sum insured needs to be at least £10,000,000.
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.
1 in 5
commercial claims the FCA reviewed had an inadequate sum insured (21 of 97).
FCA review, via Insurance Times
Average in plain English
Three ways to explain it to a client
Clients rarely read the average condition. 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
Day One gives you headroom for inflation, but only if the declared value reached the real rebuild cost at the start.
Inflation leaks out of the sum insured
Commercial building costs rose by about a quarter in five years. A sum insured 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
Pro rata average, insured at 60%
A building that costs £1m to rebuild is insured for £600k. A £200k fire pays £120k.
Paid £120k of £200k
Example 2
Day One, declared value short at the start
Declared at £1m when the rebuild cost was £1.25m. A £200k fire pays £160k, uplift or not.
Paid £160k of £200k
Example 3
Day One, total loss past the uplift
Declared at £1m with a 25% uplift. By the time of a total loss the rebuild costs £1.4m. The cap is £1.25m.
Paid £1.25m of £1.4m
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 uninsured working expenses
- = insurance gross profit
12 month indemnity period, 18 months to recover
Insurance gross profit is not the accountant's
Only the uninsured working expenses (the costs that stop when trading stops, usually purchases) come off. Wages, rent and finance costs 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.
Declaration linked takes average away
With a declaration linked basis the client declares an estimate and pays on the audited figure later. There is no average and claims are paid up to 133⅓% of the estimate.
A stale valuation
Last rebuild valuation 2021? It has gone backwards since.
The calculator can carry an old rebuild valuation forward with the ONS construction output price index for private commercial new work. It is a good first check. It cannot fix a valuation that was wrong to begin with.
When to send them to a surveyor
No reinstatement cost assessment in three to five years, extensions or a change of use since, listed or specialist buildings, or a mixed site. Demolition, debris removal and professional fees are often left out too, so ask.
The rules in the UK
How average works under UK policies
- 1
Pro rata average is the default condition
Most commercial property wordings pay a claim in the proportion the sum insured bears to the value at risk. Some only apply it once the value is over a set margin, so read the condition.
Financial Ombudsman decision DRN-4967606 - 2
Day One is not a free pass
The uplift covers inflation after the declaration. If the declared value was below the rebuild cost on day one, average applies anyway.
- 3
Fair presentation still matters
Under the Insurance Act 2015 the client must make a fair presentation of the risk. A sum insured that is badly wrong can raise questions beyond average.
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 building insured for enough?
If you had a £200k claim today, the policy would pay about £120k.
Before renewal
- ☐ Get a professional valuation
- ☐ Review the indemnity period
- ☐ Check the average condition
FAQ
Questions brokers ask
- Is this advice?
- No. It shows the arithmetic of a typical condition so you can explain it. The policy wording decides what is paid, so check the average condition and definitions in the client's wording.
- How does Day One reinstatement avoid average?
- The insurer agrees not to apply average as long as the declared value was adequate at the start of the period. The uplift then covers inflation during the period and the rebuild. If the declared value was short on day one, average comes back.
- Can it tell me what a building costs to rebuild?
- No, and nothing online should for a commercial building. It can bring an old valuation up to date with the ONS index, or show what happens if the value is 10, 20 or 30% higher than you think. For a real figure, use a surveyor.
- What is insurance gross profit?
- Turnover plus closing stock, minus opening stock, minus uninsured working expenses. 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, contractor 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 the UK and Australia.
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.