01 / The meaning
What it means.
For property, the figure should be chosen on the valuation basis required by the wording, not automatically on purchase price or accounting value. Buildings, contents, stock and business interruption may require different calculations. Some policies separately identify declared values and limits of liability, so the same figure should not be copied across every field without understanding its purpose.
A sum insured does not guarantee a payment of that amount after any loss. The insurer considers the insured damage, settlement basis, excesses, sublimits and other relevant terms. Underinsurance or average provisions can sometimes reduce a partial-loss settlement as well as leave a total-loss shortfall. Review peak stock, additions, rebuilding assumptions and any inflation allowance, documenting how the figure was established.
02 / Put it in context
A practical example.
Hypothetical example: a wholesaler’s ordinary stock level is $250,000 but rises substantially before Christmas. It reviews whether the selected sum and any seasonal increase provision reflect the peak, rather than assuming the usual monthly figure is sufficient throughout the year.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Check which interest and valuation basis each scheduled amount relates to.
- Review peak exposures and costs beyond the asset’s original purchase price.
- Understand sublimits, inflation provisions and any average or underinsurance clause.
04 / Start a useful conversation
A question for your broker.
How was each sum insured calculated, and could the policy reduce a partial claim if that amount is too low?
05 / Connect the terms
Keep the meaning in context.
06 / Apply it to your business
Related insurance guides.
Further reading
Read the source guidance alongside the relevant policy wording.
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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