Protect your charity: A guide to underinsurance

In the insurance world, there are certain words and phrases you don’t mind hearing when you need to submit a claim, such as “Your claim has been successful” or “Your claim has been paid”. Both of which suggest all was well with your cover, which takes away some of the sting and anxiety of having to make a claim in the first place.

But what if your first communication after experiencing property theft or damage is something along the lines of “It seems your charity is underinsured”. That’s never the start of good news. 

Here’s an essential definition and some initial advice on how to avoid a situation like the one described above. 

Underinsurance occurs when you don’t take out insurance to the right level. Or put another way, taking out insurance at a level that’s simply not enough to cover what you wanted it to.
 

So, if there was a fire at your charity’s premises, without the right level of insurance cover prior to the incident, it’s unlikely that you’d receive a pay-out sufficient to cover the losses. You could be left without a building, with most of your stock destroyed or damaged, and still needing to pay staff and suppliers. This could severely impact your ability to continue providing essential services to the community, leaving those who rely on your charity without the support they need.

Did you know?

Over the past 12 months, we’ve found that over 60% of our charity clients were underinsured. Of these, the average declared value increase required was 69%*.

In monetary terms, we can explain it this way. If you take out buildings insurance for your charity for £500,000, but the real rebuild cost is closer to £1,000,000, in the event of a fire, you’ll not only be dealing with the anxiety of the incident, but your claim may also be null and void.

Even if you were to put in a claim for say £100,000 – much less than the value – you’re still in trouble as you won’t have been paying the right amount of premium and therefore insurers will adjust your claim accordingly.

This applies across the insurance spectrum, whether it’s for a house, motor fleet, or multinational corporation.

So, to avoid underinsurance – make sure your sums and indemnity periods at the outset add up, and you’ve been advised correctly by an insurance specialist on the right level of premium and cover.

Here are some questions to help you reflect on your charity’s current cover and understand whether you may be at risk of underinsurance:

1.    Have your charity's premises, equipment, or contents undergone a valuation survey in the last few years to ensure your insurance cover reflects their current value?
2.    Are you expanding your charity's services, acquiring new assets, or changing your operational model? If yes, have you reviewed your existing coverage and limits to ensure they remain adequate?
3.    Are you running community or fundraising events with adequate public liability insurance to protect against significant financial liabilities from any incidents?
4.    Is your charity's building insured for its full rebuild cost, including expenses like debris removal, professional fees, and materials, rather than just its market value?
5.    Have you assessed your charity's business interruption period and indemnity to ensure they are sufficient to cover potential disruptions and financial losses?

At Howden, we recognise that underinsurance is a common issue, even for the most experienced leaders. This is often down to a combination of confusion as to what is supposed to be included in the first place. There is another common factor – reliance on outdated valuations.

Rather than just highlighting potential risks, our risk management services focus on creating contingency plans for every situation. We work closely with you to ensure you have the appropriate insurance coverage, whether it's understanding the true rebuild cost of your facilities or the correct reinstatement value of your equipment. Here’s how we can help:

Building insurance valuations

In association with Barrett Corp & Harrington

If a property is underinsured, the insurer is likely to apply the Condition of Average clause, whereby the amount of the claim is reduced proportionally to the value of underinsurance. It’s also possible that the insurer may be entitled to void the policy if it appears that the risk was unfairly presented.

This traditional ‘boots on the ground’ professional building insurance e-valuation has been created to establish the correct building reinstatement sum insured. It’s supported by major insurers for Average waiver guarantee and complies with the Royal Institution of Chartered Surveyors (RICS).

Who is it for?

This building insurance e-valuation service is provided for any client who hasn’t had their buildings professionally valued in the last 12 months. It’s suitable for single or multiple buildings.
 

Bespoke insurance solutions

Whether you’re a small community charity, or a large trust, we know that choosing the right cover to suit your requirements is crucial. Our team of experts take the time to understand what your organisation is all about – and then suggest an approach that protects you from potential risks.
 

Get in touch

If you’d like to speak with one of our specialists about our solutions, please email us at [email protected] or call us on 0333 234 1351.

Read more about our portfolio of products and services for the charity and not-for-profit sector here.

* Barrett Corp & Harrington, 2025 report