Underinsurance of Commercial Properties: A Silent Threat to Budgets and Business Continuity
Up to 70% of insured properties in the Czech Republic are currently underinsured – and this doesn't just apply to households. The problem is increasingly common with commercial buildings too. Offices, operations, warehouses, halls – their value is growing significantly, but insurance policies often remain unchanged.
What is underinsurance and why is it a problem?
Underinsurance means that the sum insured stated in the policy is lower than the real value of the asset. In practice, this means that if an insured event occurs, the insurance company will not pay the full damage, but only a proportional part.
For example:
You have a warehouse insured for 20 million CZK. However, its real value is 30 million.
If damage of 9 million occurs, the insurance company will only pay 6 million.
You thus cover a third of the damage from your own company resources.
Why does this happen?
- Prices of building materials and properties have risen sharply. However, many insurance policies do not reflect this.
- Company assets evolve. You add extensions, upgrade technology, furnish offices – but the policy remains the same.
- Regular insurance audits are missing. Many companies deal with insurance only once – when signing the policy.
Consequences of Underinsurance
- Financial Loss: the company has to cover millions from its own budget.
- Operational Halt: in the event of major damage, the business can face operational and reputational risks.
- Issues with the bank or investor, if the property is part of the collateral.
How to protect yourself?
- Regular review of insurance policies – ideally every year.
- Indexation of insured amounts, which reflects inflation and rising construction costs.
- Collaboration with an Eurovalley insurance broker, who understands not only insurance but also operational risks.
Underinsurance of corporate properties is not just a technicality in a contract – it's a real risk, which can cripple a company's operations. Give it the same attention as IT security or cash flow.
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