Do you have enough premises insurance for your garage?

Many motor traders work from some kind of business premises, whether that’s a garage, dealership, yard or somewhere similar. And because this place is the heart of your business, you need to get the right motor trade insurance in place to protect your buildings and contents from any risks. So far, so good.

But do you know if you’ve got a high enough level of protection to cover the full rebuild of your garage? The pandemic, supply chain issues and inflation have all pushed up prices in the construction industry and it’s leaving many motor traders underinsured without even realising it.

We don’t want that to happen to you, so take a quick read through this guide and get in touch if you need to discuss your policy.

What does it mean to be ‘underinsured’?

Every policy comes with a ‘Sums Insured’ – which is the maximum amount of money your insurer will pay out in the event of a claim. This sum needs to be enough to cover what we call a ‘full reinstatement’ of your garage. So that means rebuilding it from scratch and stocking all the contents to return your business to how it was before it was destroyed, i.e. by a fire.

If the actual cost of reinstating your garage is higher than the amount listed on your policy then that means there’s a shortfall in cash, and it’s your responsibility to pay for the rest of the work. This is when you are ‘underinsured’.

But there’s more to it. If it turns out you are underinsured, your insurer has the right to pay less than the Sums Insured listed on your policy in the same proportion you’re underinsured by. So if your cover is short by 25%, your insurer may only pay out 75% of your claim – leaving you with an even bigger shortfall! Or worse, they may refuse the claim completely.

So how can I avoid this?

Underinsurance is a surprisingly common issue. According to figures from valuation experts Barrington Corp Harrington, almost 80% of buildings insured in the UK would not receive sufficient funds to reinstate them if there was an insurance loss – so you can see how easy it is for people to end up with less cover than they need.

As the garage owner, it’s your responsibility to let your insurer know how much it would cost to reinstate your premises. You can cost it up yourself, but your safest bet is to get a professional valuation carried out so you have complete peace of mind the figure you tell your broker is correct – and, if possible, you should try to have this done regularly. In fact, if you haven’t reviewed your Sums Insured in the last 12 months or so, then you should consider doing it sooner rather than later for the reasons we outline below.

Why does it matter more now?

It’s been a challenging few years for all of us and prices are going up across the board, from fuel to parts to materials. But in the construction industry, the costs are spiralling faster than they are in many other sectors. In the last 12 months alone, high inflation in the construction industry has seen material costs jump by 30% and labour costs by 15%.

When it comes to your garage insurance, this means the cost to rebuild and reinstate your premises will be much higher now than it was this time last year. Unless this is already reflected in your motor trade insurance, then you could be one of the many traders without enough cover – leaving your business at risk.

At DNA, we understand how tough the last few years have been on motor traders. Supply chain issues, component shortages and rising fuel costs have all squeezed the bottom line of many businesses – so the last thing you want is for your garage to still be at risk when you think it’s covered.

We can help. If you want to run through the limits on your policy or get some guidance on valuing your garage, then we’re here. Give our friendly team a call on 01708 988952, email us or use our online form for straight-talking answers, honest advice and cover at the best prices we can find.