The contents sum insured (excluding stock) should reflect the total value of:
Stock items are the goods or products sold by a business in order to generate revenue. The stock sum insured should represent the value of all stock and materials in trade belonging to the insured, or for which they are responsible.
The stock sum insured should reflect the cost to the insured to replace the items and not the retail price.
When setting the sum insured, consideration should be given to the maximum value at risk during seasonal or other peak trading periods.
+ Closing stock*
+ Work in progress*
*at end of financial year
Uninsured working expenses
+ Opening stock**
+ Work in progress**
**at start of financial year
Uninsured working expenses are costs or specified expenses that vary directly with the level of trading, i.e. they will decrease in direct proportion to the turnover in the event of a business interruption. As these costs will no longer be incurred as the turnover reduces, there is no need to reimburse them, and as such they are called ‘uninsured’ working expenses.
One major uninsured working expense for SMEs is purchases (raw materials, components, goods for re-sale) and may indeed be their only uninsured cost. However, other uninsured working expenses could include packing material, carriage (if charged on a unit cost basis), commissions, discounts allowed and bad debts.