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Successful businesses and their reputation can take years to build. They require a lot of time, patience, and commitment to bring about results and generate profitability. However, businesses can be ruined by a single event if they are not protected or prepared. 

When damage happens to a significant asset, it has potential to disrupt operations if it does not have adequate insurance coverage. Accurate insurance valuations are crucial for businesses to protect against these damaging incidents and maintain business continuity without worry. 

In this article, we’ll explore the importance of precise and up-to-date insurance valuations to protect your business in the face of harmful events. 

What is an insurance valuation? 

Also known as a reinstatement cost assessment (RCA), an insurance valuation is a professional evaluation report usually carried out by a RICS-certified surveyor. This will determine the cost to either reinstate or replace the existing assets or property “as new” in the event of a total loss or if they were destroyed by an insured event. 

The purpose of an insurance valuation is to ensure that businesses have adequate insurance cover to meet these potential losses. This prevents the business from suffering financially after an insured event. 

When should an assessment be carried out? 

The Royal Institution of Chartered Surveyors (RICS), and many insurers, recommend that an insurance valuation should be carried out every three years, or when there is a substantial change to a property or asset. 

However, supply chain disruptions, global inflation rate volatility, and labour shortages have pushed up rebuild costs in 2026. Consequently, reassessments carried out even 18 months ago may not reflect the financial changes from shifting global economics, and businesses may not be sufficiently insured in today’s climate. 

Therefore, we at Charterfields recommend that declared values should be updated annually, even if this is just an indexation to reflect current rebuild inflation, or if assets materially change. This doesn’t always require a full inspection and rebasing, but adjustments need to reflect the correct inflation, any capex movements and any other changes on site. 

The risks of insurance valuation gaps 

An accurate, up-to-date insurance valuation is crucial to ensure that businesses are not underinsured or overinsured on their assets. Either extreme carries the risk of significant financial losses. 

Our recent Insurance Gap Report, prepared annually to analyse the extent of under or over insurance across various UK sectors, found some fascinating results:

  • Both buildings and contents at all locations we inspected are overwhelmingly underinsured, at 87% and 83% respectively.
  • For 13 key sectors whose buildings and civil works we assessed over the last seven years, the average rate of underinsurance sat at 24.27%.
  • Across seven sectors that we analysed, the average rate of underinsuring contents sat at 93.60%.
  • The Automotive industry appears to be overinsuring some building assets by some 15%. 

These staggering figures indicate the underlying issues in how locations are setting declared values for assets in the first place. In the case of total loss, businesses in these sectors would find themselves exposed. 

Failing to ensure your declared values accurately reflect your assets carries three potential risks:

1. Financial losses

In the case of either over or underinsurance, financial losses are a serious risk. 

If a business’ assets are underinsured, this means the declared value in an insurance policy is lower than their true reinstatement cost. So, if the assets are damaged or destroyed in an insured event and a claim is made, insurers may invoke the ‘average’ clause in the policy. While this policy clause was sometimes removed in the past, it has made its way back into many property damage policies. In practice this means insurers may pay out only the ratio of the declared value to current reinstatement cost irrespective of the size of the loss. So if you are 20% under insured, insurers may only meet 80% of any claim.

This means that the policyholder would then need to find additional funds to repair or rebuild the insured asset to its full operational standard. Finding and providing this additional cost may have a serious impact on some businesses, depending on the insurance gap and their financial reserves.

On the other end of the scale, overinsuring assets would also mean a financial loss. By overinsuring and overvaluing, firms can end up losing money on wasted premiums and coverage that they will not be able to use in the event of a claim. 

In the case of some firms in the Automotive industry, who appear to be overinsuring their building assets, this may be due to lack of clarification on the demarcation between property and plant, or infrastructure that has changed in line with newer technologies. 

2. Challenge to business continuity

Businesses with under insured property or contents may struggle to afford to replace them in the event of a total loss. 

In our 2026 report, we found that contents, plant and equipment for the Agriculture & Animal Feed industry have an actual reinstatement at an average of 290% of the existing declared values. For this rate, in the event of a total loss, agricultural businesses could recover from insurers only around 30% of any loss meaning they would be unable to replace their essential contents and specialised equipment. 

Even if insurers ultimately accept the claim, if they suspect under insurance, there can be a significant delay in settlement as the merits of the case are debated, impacting a firm’s ability to recover quickly from an incident. 

Since these assets are crucial for daily operations, failure to replace them may lead to operational downtime, causing supplier issues and customer dissatisfaction. Ultimately, these negative impacts would result in even greater losses to income, and potentially induce business closure.

3. Reputational and further legal damage

If a business cannot afford to replace or protect their assets, they may face scrutiny and reputation risk. Especially for supply chains and customer bases, seeing businesses not declaring accurate valuations may lead to distrust and questioning the company’s reliability. 

Delays in reinstatement following a loss can impact a business’s reputation. One example of this is the administration of a bakery in Manchester following a fire in 2023. During the rebuild period, production was outsourced to another bakery which led to quality issues and loss of sales as customers turned to competitors.

Furthermore, directors of these at-risk businesses could see hits to their personal reputations. Most directors take a conscientious approach to their duties, and in particular their responsibilities for appropriately managing the finances of a business. 

However, many directors are unaware that this duty could extend to ensuring appropriate insurance cover for fixed assets. If directors are responsible for losses incurred, that cannot be recovered due to lack of suitable insurance or underinsurance, directors may be subject to reputational damage, dismissal and/or litigation.

In many legal jurisdictions, a firm can bring a claim against an erring director if it can show that it has suffered financial loss.

Practical next steps to keep assets protected in 2026 

The risks outlined above are not to be ignored. They are a critical reminder of the harsh reality of not getting asset valuations correct. 

If you find that your business is potentially in a position where your declared values might  no longer represent your current assets, here is a short checklist of quick actions you can take:

  • Internal audit 

Review your assets against their current reinstatement value (on a new for old basis). 

  • Completeness

Has everything been included that ought to be incorporated in the declared values, for example external works (roads, fencing, minor buildings, etc), rented equipment and mobile plant?

  • Identify any significant changes in your assets

For example, have buildings been extended or significantly renovated;  has machinery been replaced; has there been significant change in foreign exchange rates and your facility has a high degree of imported materials or machinery?

  • Accurately identify buildings and contents

One of the most common causes of friction in insurance claims is what constitutes the building, and what counts as contents. Make sure you understand the appropriate demarcation and does this match to your insurance policy. Importantly ensure you’re not paying to insure the same asset twice, or not at all. 

If you find that you have identified any significant changes, the current cost is vastly different to your current declared values, or your assets are not insured properly as either buildings or contents, it may be appropriate to engage with RICS-qualified valuation experts, like Charterfields, to carry out a new reinstatement cost assessment to rebase values. 

Partner with the experts in insurance valuations

Ultimately, being adequately insured is not just a nice-to-have – it’s business-critical. Without suitable coverage in the face of damaging events, there are significant risks to your supply chain, business reputation, business continuity as well as potential legal exposure. 

Accurate valuations prevent wasted premiums from overinsurance, and the losses tied to underinsurance. 

We strongly encourage business owners and directors to review their current declared values and confirm that their assets are not at risk from incorrect insurance coverage. A professional insurance valuation ensures your coverage aligns with modern needs and regulations. 

To discuss any valuation requirements, please get in touch with the Charterfields team today.