Why your Event should never be Underinsured ?
Underinsurance?is an insufficient insurance coverage?that leaves the policyholder responsible for a large percentage of a total loss or expense which may lead to financial hardship.
·?????In the event of a claim, being underinsured it may result in?economic losses for the policy holder, since the claim could exceed the maximum amount that could be paid out by the insurance policy. Underinsurance comes from having wrong coverage or insufficient coverage for your event.
·?????Events who do not have the proper insurance coverage face a variety of risks that could impact their bottom line.
Event Companies usually underinsure their events to save on paying the correct required insurance premium.?
·?????Event Companies who under insure their events are exposed?to financial or legal risks If event is underinsured, their insurance claim pay-out might only cover a portion of the claim, with the business having to cover the rest of the amount out of pocket. Many threats could endanger a business that does not have the correct insurance coverage, such as:
·?????Financial impact:?In the time of a cataclysmic event, such as a fire, flooding, hurricane or major storm, burglary or Event Cancellation or Postponement not having the right insurance coverage could be devastating for a business to recover from financially.
·?????Loss of Business: Catastrophic events could damage a event’s property and equipment, directly affecting the business’s productivity and, ultimately their profit. Recovering from paying for this damage above and beyond what insurance covers could be detrimental to event companies and could put business owners into personal financial risk.
Underinsured businesses might not have the right coverage to assist in the pay-out for these types of damages.
How will an Insurance Company Apply the average Clause? If your event is found to be underinsured
·?????In Case of underinsurance the Insurance company will apply the Average Clause. However, the Average Clause limits the liability of the Insurance company to a loss amount that is in proportion to the covered and uncovered sum insured. The actual amount of the claim is determined by the below formula.
Claim Payable = (Loss suffered x Insured value) / Total Value
Illustration – Suppose the event Company has taken a sum insured of Rs 1,00,000 in the policy of event cancellation or Fire or burglary which has actual value of Rs 1,50,000, in the event of a accident, the insured suffers a loss of Rs 30,000.
In this scenario, the insurance company will indemnify the insured with Rs 20,000 i.e. Rs 30,000 x 1,00,000/1,50,000 and the balance of Rs 10,000 has to be borne by you.
Here are some common examples where you could find yourself under-insured:
·?????Under estimating the replacement cost for event equipment’s during Fire, Adverse Weather, Burglary, Property damage
·?????No or insufficient cover for Unrecoverable expenses and deposits payed to Event Vendors, Hotels, Flights etc
·?????No or insufficient cover to cover Loss of Revenue (which will cover ticket sales, Sponsorship Money, Revenue payed by Advertisers
·?????Not adhering to the duty of disclosure requirement
Business owners need to understand the impacts that under-insurance can have on their businesses because under-insuring can cost you financially and even worse, mean the end of your business.
