Regularising insurance policies is not just a formality; it is the difference between having coverages that respond to the reality of the risks and facing (not pleasant) surprises in the event of a claim.
What is regularisation?
Regularisation involves retroactively adjusting the insured values of a policy to accurately reflect the risk actually faced by the company.
When and how is the regularisation of a policy performed?
The regularisation process can be monthly, quarterly or annually, but by far the most common approach is the annual review once the policy is renewed. Basically, it is calculated by comparing the actual value against what was originally stated in the policy. And, of course, the concept of what you will regularise will depend on the type of insurance involved.
Which insurances are regularised and which concept is regularised in each of them?
Only some specific types of business insurance need to be regularised. Let’s take a look at them:
Business Liability Insurance
The premium for a business liability insurance policy is based on the declared turnover. At the end of the insured period, the actual turnover is compared with the turnover declared in the policy. Is there a difference? It must be declared to the insurance company and paid for.
All-risk property damage or multi-risk business insurance:
When the insurance contract has floating stock, it must be regularised by declaring the actual stock that the company has had on a monthly basis in the insured period that has just expired. If your policy has an automatic coverage clause, do not forget to also adjust the capital sums of the building and contents.
Group life or accident insurance
Here a premium is usually paid for an estimated number of employees. At the end of the insured period, the exact number of employees is adjusted month by month. No surprises, everything is in order.
Transport insurance
In the case of transport insurance, the volume of goods transported or the turnover is adjusted to the period due, in accordance with the policy details.
Temporary construction insurance
When we talk about policies such as Construction Liability or Construction All Risks, we start from the initial budget of the project and, at the end, we declare the real total cost of the work. In this way, you only pay for what was actually built and the risk that was assumed.
If the values after the regularisation are higher than those initially insured, the insurance company will issue a regularisation receipt to collect the difference in the amount of the premium that has remained uncollected.
Why is it important to carry out regularisations?
Regularisations are not optional. They are an obligation of the policyholder, and avoiding this procedure in ‘bad faith’ could leave the insurer in a position to deny coverage in the event of a claim. Having up-to-date values is essential to prevent underinsurance and avoid unpleasant surprises when protection is most needed.
What is the automatic coverage clause?
The automatic coverage clause, common in property damage insurance, allows the insurer to automatically cover increases in the insured sum, in a determined percentage that normally ranges between 10% and 20%. However, as long as these increases are within the risk situations previously declared in the policy.
Do you have doubts about the regularisation of your insurance policies?
Don’t be left wondering. Contact our team of experts for professional advice and ensure that your insurance really meets your company’s needs and risks.
