MIGA is pleased to offer Business Insurance as part of MIGA Plus via Guild Insurance. Read an interesting article from Guild about what happens if you don’t have adequate insurance.
Insurance policies come in different shapes and sizes with variations in coverage, some of which are cosmetic in nature, relating to policy sub-limits and excesses however, some variations are more significant and can have a far greater impact on a potential claim settlement.
One such example is the application of the ‘averages’ clause commonly found in property insurance policies of all kinds (including home insurance policies).
One feature that sets the MIGA Plus Business Insurance apart is the inclusion of a ‘Reinstatement Plus’ basis of settlement. This provides an added layer of protection against inadvertent underinsurance and the application of the dreaded ‘averages’ clause. ‘Reinstatement Plus’ provides protection on two fronts:
- The policy holder is not subject to the ‘averages’ clause contained in the policy.
- The policy holder receives a 50% uplift of the sum insured where the stated sum insured is lower than the actual loss.
Here’s how it works in a ‘real life’ example
An insured leased approximately 80 square meters of space in a shopping centre. In the early hours of the morning a fire started in an adjoining property. Extensive damage to the insured’s contents was caused by the fire, smoke, heat and the fire extinguishment procedures.
The practice owner had the following sums insured on their policy:
- Contents – $198,000
- Business Interruption – $160,000.
The Business Interruption sum insured was adequate, however upon review of his contents following the fire, it was discovered that the actual sum insured for contents should have been $320,000.
The assessed loss:
Damage to the office fit-out, equipment and stock was assessed at approximately $300,000.
Business Interruption loss was assessed at $140,000.
The claim settlement:
The practice had inadvertently underinsured its contents by $122,000.
Being under-insured by this amount would normally bring the “averages” clause into play when calculating settlement for other insurers.
For this practice, the settlement figure for the loss of his contents would have been $184,000, under such a clause.
This would have meant the practice would have had to find $116,000 out of its own pocket to replace the damaged items.
If however the practice was insured with MIGA Plus Business Insurance, the actual settlement would have been assessed as:
- $198,000 + $99,000 (50% uplift of the actual sum insured) = $297,000.
As you can see, instead of the practice having to find a $116,000 shortfall in the claim settlement, the ‘Reinstatement Plus’ basis of settlement provided all but $3,000 of the total assessed loss. This would have enabled the practice to get back up and trading once again.
The true value of insurance is often only demonstrated at the time of a claim. Whilst price might influence who you insure with, remember, premium is only ever one part of the equation. It’s important to understand the cover you are purchasing.
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