Many believe insurance guarantees full protection, but gaps in coverage can be costly. Being underinsured—having insufficient coverage to fully compensate for a loss—can be just as risky as having no insurance at all.

Whether it’s your home, business assets, or liability cover, inadequate policies can leave you with significant out-of-pocket expenses. This blog explores the risks of underinsurance, how to assess your coverage, and steps to ensure you’re fully protected.

What Does It Mean to Be Underinsured?

Underinsurance occurs when your policy doesn’t provide enough cover to fully pay out a claim. This often happens due to:

• Incorrect valuations – Insuring assets for less than their actual worth.
• Outdated policies – Failing to adjust coverage as circumstances change.
• Insufficient limits – Policies with payout caps that don’t cover major losses.
• Exclusions and gaps – Assuming certain risks are covered when they aren’t.

Most discover they’re underinsured only after a denied or insufficient claim.

Common Areas of Underinsurance

1. Property Insurance – Are You Covering the Full Value?

Many property owners underinsure buildings, leaving them vulnerable to major financial losses.

Example: If your commercial property is worth R5 million but insured for R3 million, your insurer may only pay a portion of any claim, leaving you responsible for the shortfall.

Solution: Insure your property based on replacement cost, not just market value. Review annually to account for inflation and rising building costs.

2. Business Interruption – Can Your Business Survive a Shutdown?

Businesses often insure assets but forget to cover operational disruptions. Business interruption cover helps bridge the financial gap when revenue stops due to unforeseen events.

Example: A fire forces your restaurant to close for six months. Without business interruption cover, you must cover rent and salaries without income.

Solution: Ensure your policy includes:

• Adequate indemnity periods – Factor in realistic recovery times.
• Loss of income protection – Cover fixed costs and lost earnings.

3. Liability Cover – Are Your Limits High Enough?

Liability policies protect against legal claims, but low limits can leave businesses exposed.

Example: A customer slips in your store and sues for R3 million, but your liability cover is capped at R1 million—leaving you responsible for the remaining R2 million.

Solution: Increase liability limits based on potential claim sizes in your industry.

4. Cyber Insurance – The Hidden Risk Many Businesses Ignore

Many businesses wrongly assume their general insurance covers cyber risks.

Example: A hacker steals customer data from your system, leading to legal action and costly recovery efforts.

Solution: Cyber insurance should cover:

• Data breaches and recovery costs.
• Legal liability for customer data protection failures.
• Business interruption caused by cyberattacks.

5. Vehicle Insurance – Do You Have the Right Cover?

Vehicle policies often have exclusions that leave owners uncovered.

Example: Your business vehicle is stolen, but your policy only covers third-party liability, meaning you receive no payout.

Solution: Ensure your policy covers accidental damage, theft, and third-party liability, with an insured value matching market or replacement value.

How to Avoid Being Underinsured

Review Your Insurance Regularly

Update your coverage to reflect business growth, new assets, and inflation. Review policies when you:

• Expand operations or acquire new assets.
• Renovate or upgrade your home.
• Hire more staff or introduce new services.

Consult a Professional Broker

Insurance policies are complex. A qualified broker can assess risks, identify coverage gaps, and tailor a policy to your needs.

Read the Fine Print

• Know what’s covered—and what isn’t.
• Check for exclusions that could impact claims.
• Understand excess payments and how they affect payouts.

Final Thoughts

Underinsurance can cause major financial strain—don’t let it happen to you.

Don’t wait until it’s too late. Contact Ti Brokers for a professional insurance review and ensure you’re fully covered today.