The Essential Guide to Reviewing Your Care Home Insurance: Inflation and the Risks of Underinsurance

Supported Living

As a care home owner or operator, you understand the importance of providing a safe and secure environment for your residents. Comprehensive care home insurance is a critical component of this endeavour, protecting your business, staff, and residents from a range of risks. However, it’s vital to recognise that your insurance needs can change over time, and one of the most significant factors to consider is inflation. In this article, we’ll explore why it’s essential to review your care home insurance in light of inflation and the risks of underinsurance.

Understanding the Impact of Inflation

Inflation is the gradual increase in the general price level of goods and services in an economy over time. As the cost of living rises, so do the expenses associated with operating a care home. This includes increased costs for wages, medications, equipment, and building maintenance. These inflationary pressures can significantly impact your operational expenses and, subsequently, your insurance needs.

Risks of Underinsurance

One of the most significant risks associated with not reviewing your care home insurance in light of inflation is the potential for underinsurance. Underinsurance occurs when the coverage limits of your policy are insufficient to cover the full extent of a claim. This can leave your care home vulnerable to financial strain in the event of an incident.

Here are some of the key risks of underinsurance for care home owners:

  1. Inadequate Cover for Rebuilding Costs: If your property insurance cover is based on outdated construction costs, you may not have sufficient coverage to rebuild or repair your facility in the event of severe damage such as a fire or flood.
  2. Staffing and Liability Issues: Inadequate cover can leave you exposed to legal and liability claims. For example, if staff wages have increased due to inflation, and your insurance doesn’t account for this, you may face difficulties covering the costs associated with employee-related claims.
  3. Inadequate Resident Protection: Your primary concern is the safety and well-being of your residents. If you have cover for residents effects then these need to be reviewed to ensure you have the proper limits to cover their belongings.

The Importance of Regular Insurance Reviews

To mitigate the risks associated with underinsurance, it’s essential to conduct regular reviews of your care home insurance. Here’s how you can ensure your cover remains adequate:

  1. Annual Policy Reviews: Work closely with your insurance broker like Aldium to conduct annual policy reviews. This allows you to assess changes in your business, inflation rates, and any modifications to your facility.
  2. Professional Appraisals: Consider having professional appraisals of your property and assets to ensure your property insurance accurately reflects current replacement costs.
  3. Staff and Resident Updates: Provide your insurance broker with updated information about staffing levels, staff wages, and any changes in resident populations.
  4. Cover Flexibility: Explore insurance policies with inflation protection riders, which adjust your cover limits annually to keep pace with rising costs. (Often called Index Linked).


As a responsible care home owner, it’s crucial to recognise the impact of inflation on your insurance needs. Regularly reviewing your care home insurance with a knowledgeable insurance broker ensures that your coverage remains up-to-date and can adapt to changes in your business environment. By staying proactive, you can protect your care home, staff, and residents from the risks of underinsurance and provide a secure and nurturing environment for those in your care.

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