If a claim is successful, how much will be paid?
Understanding the process of settling a claim
Insurers often make deductions when settling a claim, so how much will you actually be left with?
In answering this question, perhaps one of the key things to keep in mind is that one of the main purposes of insurance is to put you in the position you would have been in BUT FOR the claim. Insurance is not designed to put you in a better position than you were in prior to the claim and for this reason, your insurers will likely make one or two deductions when settling any claim under your policy.
What deductions will an insurer make?
There are three main deductions which you might see when making a claim under a Superscript policy:
- Wear & Tear
All Superscript issued policies have a compulsory excess which will be due on each and every claim you make. The excess is a pre-agreed monetary sum which, at the time the policy was issued, you agreed to pay in respect of a claim.
Most insurers will give you the option of either having the excess deducted from any settlement due, or, paying the excess.
In some instances, such as a third-party property damage claim, it’s necessary to pay your excess to your insurers as it will enable them to make a full payment to the affected third-party for any damage which has been caused. Alternatively, Insurers may suggest that you pay this excess directly to the affected party.
Your excess will only be due once in respect of each claim. So if, for example, after having raised a payment following a theft claim, you discover other items which have been taken that you didn’t previously report, the additional items would still be linked to the original claim and no further excess would be payable.
One of the questions you’ll be commonly asked is whether or not the business is VAT registered. If not then the claim would be paid in full (less the excess) by your insurer.
If you are VAT registered, then your claim would be paid net of VAT (net here means less the VAT). This is because your business can claim the VAT element of your insurance claim from HMRC on your next VAT return.
Wear and tear
Depending on who your insurance is with, it may be that a figure is deducted in respect of wear and tear. You will know this is the case if your policy refers to payments being made on “an indemnity basis”.
This means that under the terms of your policy, your insurers will reimburse you for the cost of the replacement of, or repair to, your equipment to a condition as good as, but not better than, its condition at the time of your claim. In these circumstances, insurers will make a deduction from any settlement due based on the age of the items being claimed for.
Not all policies make this deduction and some insurers may pay for damaged equipment on a reinstatement basis meaning that your settlement will be paid based on the current RRP of the equipment in question.
Further information around wear and tear can be found in our article HERE. (Link to the above).
So, how to answer the question around how much you’ll receive for your claim? Keeping in mind the above, the total settlement due on your claim will be the total value of the claim LESS your excess, LESS VAT (if you’re VAT registered) and LESS any applicable deduction for wear and tear.
Discover more about making a claim
Our business insurance claims guides answer the questions you may have about making a claim in detail, so you have all the right information should you need to claim.