Secure the Shot - Underinsurance and the "Condition of Average"

As a photographer, we all know and appreciate that your equipment isnt just equipment, it represents your livelihood and it may have taken many years to accrue what you have, often leading to investment of many thousands of pounds. Losing it could mean losing your ability to work.

Understanding your insurance coverage is critical. Many photographers unknowingly fall into the trap of underinsurance and when disaster strikes, they’re shocked by how little their policy pays out. This article will help you avoid that.

What is meant by Underinsurance?

Underinsurance occurs when the amount you’ve insured your equipment for is less than its actual value.

For example, you own a total of £50,000 of camera equipment and accessories but you have only insured for £25,000. That means you’re 50% underinsured.

This is where the trouble begins.

Enter the “Average” clause

Most insurance policies include a “Condition of Average” clause. This clause reduces your payout in proportion to the level of underinsurance. So, in the example above, if you’re 50% underinsured, your claim will be subject to a reduction of 50%.

A hypothetical claims example

You’re driving home from a shoot and stop at a motorway service station for refreshments. While you’re inside, your vehicle is broken into and all £50,000 worth of equipment is stolen.

You report the theft to your insurer. They confirm the claim is valid but in checking your policy, they see you’re only insured for £25,000. Due to the Average clause, your payout won’t be the £50,000 you’ve had stolen nor the £25,000 limit of your insurance policy. In fact, it’ll be £12,500 (before any excess deductibles).

That’s a £37,500 shortfall between the insurance pay out and total of the actual loss to you and your business.

Ouch.

Why does this happen?

1. Photographers often underestimate the value of their kit or forget to update their policy after buying new gear.
2. Items like lenses, camera bodies, drones and lighting add up fast and sometimes without you realising. With tech evolving constantly, it sometimes makes replacement costs higher than expected.
3. Some may deliberately underinsure to reduce premiums, not realising the risk they’re taking when it comes to Underinsurance.

How can I avoid it?

1. Keep a detailed inventory list. List every item with its current replacement value and update it regularly. For good order, remember to keep this list up to date with equipment which you may have sold or becomes redundant.If you have ageing and redundant equipment held in storage which hasn’t been sold but is no longer use, holding little to no value, it is not always necessary to insure these items on your policy as long as you declare your intention to only insure what is listed on the inventory up front and seek confirmation of this agreement from both your insurer and/or your insurance broker from the onset.
2. Base your valuations on the full replacement cost.
3. Speak to your insurance specialist. They can help tailor your policy and explain the fine print.