Is underinsurance putting your business in Cambodia at risk? We take a look at this common issue.
Fire insurance for businesses in Cambodia is essential
Your business in Cambodia undoubtedly has vital business assets which need protection in the event of a fire. Fortunately, major fire incidents are relatively rare but they do happen so disregarding fire insurance is not an option. Valuable buildings, equipment, and stock should be insured against unexpected events including fire, flood, lightning strike, or explosion.
Fire insurance provides a guarantee that in the event of a fire, your business will receive a payout for loss of revenue, profit, or rents affected by the damage. Having a comprehensive fire insurance policy that covers all of this is essential.
Many businesses in Cambodia are underinsured
However, evaluating your fire insurance requirements is not always easy and underinsurance is a huge problem for businesses in Cambodia. The kicker is that all too often underinsurance is only discovered following a fire when it is too late to rectify the issue. This adds an additional level of stress to an already difficult situation and inevitably causes major financial problems. It can even lead to bankruptcy.
The dangers of underinsuring your business in Cambodia
Underinsurance occurs when a business and its assets are not insured for their full value.
The appraisement clause in a contract of this nature basically means any claim over $5000 or 5% of the sum assured, whichever is the lower, will cause the whole value of the insurance to be assessed.
This frequently brings to light an underinsurance issue which results in a reduced payout. To give an example:
- Business X submits a claim for $100,000 due to damage caused by a fire.
- This triggers an insurance valuation which reveals that the building is valued at $5,000,000.
- But Business X only has insurance for $3,000,000.
- The building is underinsured to the tune of 40% so the payout received is only 60% of the value claimed i.e. $60,000.
A second problem is not including all perils in a policy. Did you know for example that smoke damage caused by a fire is not automatically covered by a standard fire policy? Nor is damage to the premises caused by water sprinklers although you could be forgiven for assuming that both of these scenarios would automatically be covered.
What I hope to have highlighted here is the need for expert advice on fire insurance. It is essential to get regular professional evaluations of your business to ensure that you have all bases covered in the event of a fire. This is even more important for an expanding business where assets are increasing in value. We always advise clients to ensure full coverage by including additional perils such as explosions or storms, tempests, and floods.
Infinity is Cambodia’s most trusted insurance agent. We can analyse your business’s needs and help you put in place watertight fire insurance which won’t burn a hole in your pocket.
Please contact us for a free evaluation of your current fire insurance policy to check it correctly meets the requirements of your business in Cambodia.
I started in the financial services industry back in 1995 and I am now the Country Director of Infinity Financial Solutions (Cambodia) Limited, specializing in corporate and individual medical and general insurance needs along with expatriate financial planning.