Underinsurance: A risk no SME can afford to ignore

Did you know it’s estimated that one in three SMEs with buildings insurance are underinsured?*  And only 39% of UK businesses have reviewed their insurance in the past year?**

Being underinsured isn’t just a minor oversight, it exposes your business to the very real risk of a significant financial shortfall if you ever need to make a claim.

At Macbeth, we see underinsurance across all sectors, and it often happens gradually, perhaps because property values haven’t been reviewed, new assets haven’t been added to cover, or there’s been a focus on keeping premiums low rather than making sure cover is adequate.

The problem is that when a major event occurs like a fire, flood or cyber-attack, the financial gap left by underinsurance can be crippling.

Why businesses find themselves underinsured

There are several recurring reasons why SMEs end up with cover that doesn’t match their true level of risk:

• Outdated valuations – rebuild costs, replacement values and stock levels are rarely static, especially in times of inflation.
• Unrecorded growth – adding staff, sites or equipment without updating insurance leaves new exposures unprotected.
• Misunderstood policy wording – complex language often leads to assumptions about what is, or isn’t, covered.
• Cost over cover – reducing premiums may feel like a win, but it usually comes at the expense of adequate protection.
• Overlooking new risks – cyber threats, extreme weather and supply chain disruption are now part of everyday business, but often absent from traditional policies.

And in the event of a claim the consequences can mean more a reduced payout. Inadequate business interruption cover can mean months of downtime and severe strain on cash flow, liability shortfalls can open the door to costly legal claims, and even reputational damage from missed deadlines or service disruption that can linger long after the event itself.

The good news? Underinsurance is preventable.

To minimise the risk, SME business owners should focus on three key steps:

1. Reassess your cover regularly – Especially after operational changes such as expansion, new hires, or equipment upgrades. Make sure your insurance also accounts for emerging risks like cyber threats, climate-related events, and evolving liability exposures.
2. Get a professional valuation – Accurate valuations of property and assets are essential, particularly during periods of inflation or supply chain volatility.
3. Meet with your broker regularly – Keep them updated on any changes to your business so they can help you understand exactly what level of cover you need.

No one wants to discover too late that their insurance won’t fully cover a claim. Working with a broker who knows your business inside out ensures you’re not facing these questions alone. A good broker will challenge assumptions, identify gaps, and give you the confidence that your cover will hold up when you need it most.

We often hear, “nothing has changed since last year,” but in reality, very little stays the same. With rising costs, ensuring your sums insured are accurate is more important than ever.

Worried you might be underinsured? Ask us for an underinsurance check.

And if you’d like to know more, be sure to download our free underinsurance and risk insights guides.

*Based on Aviva’s modelled data on SME customers with buildings insurance, June 2025

**YouGov Survey commissioned by Aviva – 1,218 UK senior business leaders surveyed between 15 September to 8 October 2023