FAQs
1. Directors and Officers Liability
Are Directors personal assets at risk through their involvement in running their Company?
Directors and Officers can be pursued in a personal capacity for wrongful acts as result of their business activities. If successful their personal assets are at risk as a claim would be made against them personally and not the company. The Company taking out Directors and Officers Insurance can therefore protect their current and past Directors’ personal assets.
2. Property Insurance
On what basis should I insure my machinery and plant on, Reinstatement or Indemnity?
At the present time second hand machinery is often available and if in your business this is the case, then one option for you, from a finance point of view, may be to place your cover on an indemnity basis. The sum insured would then reflect what you would expect to pay for second hand equipment.
If however the type of machinery used does not fall into this category and you would need to buy new equipment or preferred to do so, then the Reinstatement method should be chosen and sum insured reflect the amount to replace machinery with brand new equipment. In today's insurance market, this is generally the basis of most policies.
You can with some insurers, have mixture of the two basis with identification of machinery in each category and appropriate sums insured.
3. Employers Liability
Why do I need to provide cover for Sub contractors under my policy?
If you arrange for a subcontractor to carry out work for any contract that you are undertaking, you have a responsibility for their actions. The extent of your responsibility will depend on the basis on which the subcontractors are undertaking work on your behalf.
If you employ what is termed as a Bona Fide Sub Contractor i.e. a company employed to do specific activity and working under there own control, then you only have a contingent risk to cover, as the subcontractor would have their own insurance any claim would generally be directed to their insurance policy. In the event that their insurance policy failed to provide cover, then your policy would then provide the contingent cover required.
In the case of Labour only subcontractors being engaged, as they work solely under the control of the main contractor, they are effectively treated as employees. As such you would be responsible to cover both the Employers and Public liability risks.
4. Under Insurance or Average
What does it mean if I am not insured for the full value?
Most policies include an under insurance or “Average” clause. Most insurers charge a rate per cent on the cost of rebuilding or replacing your assets and this then produces your premium. It is therefore essential that when estimating your sums insured, you do so fully and accurately. Some businesses declare lower sums insured to reduce their premiums or which they feel is the maximum loss that they could sustain. However this will almost certainly mean that you will breach the average warranty.
So, to give you an example, consider a property that is currently insured for £3,600,000.
Assume that the true rebuild cost is actually £4,320,000 (the property has been undervalued by 20%) and a claim is presented to insurers for £2,500,000.
If insurers applied the average clause stating that the property was actually only insured for 83.33% of its true rebuild value, then the settlement made by the insurers would only be £2,083, 250 - which would leave a substantial shortfall of £416,750, which would have to be found by You!!
There are many variations of this rule and we are able to offer solutions to eliminate this risk.
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