Reasons for incorrect sums insured

By Rebeccah Dowell, August 25th 2020

We are often asked by clients why they were incorrectly insured following completion of the valuation exercise or to provide clarity on why our values are correct. Understandably clients want to review the reasons why they should amend their insurance cover following completion of any exercise.

Some common reasons that organisations get their reinstatement values wrong are:

  • The insured values are based on market value, not actual reinstatement costs
  • The assets have not been professionally valued for insurance purposes in the last three years
  • The insured values do not allow for recent changes in the cost of labour and raw materials
  • Changes in technology may enable replacement with cheaper modern materials
  • The buildings are listed or of an unusual construction or there have been major refurbishments, modifications or additions
  • The insured values are based on out-of-date asset registers
  • The insured values do not allow for fluctuations in exchange rates
  • The insured values have been calculated using incorrect indices or non-specific indices
  • Indexation has incorporated equipment bought second hand which may not reflect the true cost of replacement in the event of a loss
  • Values established using client data only without independent asset verification
  • Values established by proprietary modelling and generalised cost data

Often clients hold insurance cover for their assets at the same value or index the value on a yearly basis without really understanding how and when the values were first established. Project costs for new product lines are often added without allowing for any reduction for redundant plant items or adaptions to the buildings or services.

An insurance valuation, whether completed from the desk or following a site visit, provides protection from the risk of over or under insurance; provides independent evidence in the event of a loss and supports risk management processes such as EML type studies. It also provides clients with professional indemnity insurance for the values that we are reporting.

Insurance cover responds when something unforeseen happens, such as a fire. If average is applied, due to the assets being incorrectly insured, then the insurance cover does not perform when the business needs it most and they may be liable for any shortfall in the event of an under-insured loss.

A professional valuation, produced by a firm of RICS regulated professional valuers, provides organisations with current and correct reinstatement values for their fixed assets and avoids the issue of incorrect sums insured.

This is where Rushton International can help. With a team of both property and plant and equipment valuers located across the country and continent, we can meet all your insurance valuation needs. For further details on our valuation solutions please get in touch with us.


About Rushton International

Rushton International is an independent and impartial asset valuation and advisory firm. We specialise in the valuation of plant, equipment and buildings for insurance purposes. With our team of qualified and accredited valuers, we have the experience, qualifications and expertise to value any asset, anywhere in the world.

Read more

Contact Us

    Insurance Valuations

    Insurance Valuations

    Rushton International is a tried and trusted name in insurance valuations. Our valuation advice assists clients, risk managers and their brokers to accurately and confidentially set sums insured for the fixed assets in their insurance programme.

    Financial Valuation

    Financial Valuations

    We work with our clients to deliver comprehensive valuation advice for financial reporting purposes. By using our sector experience and market knowledge we are able to assist with the valuation of plant, equipment and other specialised assets in order to estimate fair value for GAAP and IFRS financial reporting purposes.

    Asset Management

    Asset Management

    Rushton International provides asset management solutions that are tailored to our clients’ needs. Our work ranges from asset verification, preparation of computerised asset registers and updating asset registers.

    Rushton News

    Energy’s change in direction heightens risk of underinsurance

    From taking steps to move away from fossil fuels or just trying to keep up with energy demands hindered by the war, the energy market is changing. The need for change has never been more crucial and companies are working faster than ever to adapt. Looking to the future Centrica recently...

    INSURANCE VALUATIONS, NEWS October 12th 2022

    Risk of underinsurance grows with inflation

    Earlier this summer, inflation in the UK reached a 40-year high of 9.4% and as a result many economists predict the UK to have the highest rate of inflation of the G7 nations for the next two years. Many factors have caused the rapid rise, from the ongoing energy crisis and war in Ukraine,...

    INSURANCE VALUATIONS March 23rd 2022

    Why regular revaluations are important

    There are several reasons as to why regular revaluations are essential for any property owner or insurance manager and we have listed the key factors below: Ensuring the Correct Sums Insured remain up to date Ensuring the Correct Sums Insured remain up to date is both a cost consideration...

    INSURANCE VALUATIONS November 8th 2021

    Why valuations matter

    Valuations and regular re-valuations are key and should be at the forefront of the mind of any prudent property owner or insurance manager. Ultimately, exposure to underinsurance would mean funding replacement costs following a loss from other sources.  A reserve that many businesses will not...


    The Impact of COVID-19 on the UK construction market

    And why now more than ever it is prudent to review Buildings & Material Damage Sums Insured. The Global pandemic has had an unprecedented impact on the UK construction market, with the industry recording its worst slump in more than two decades last month, as many builders shut down their...