Do you have sufficient cover?
Commercial property insurance is based on the reinstatement cost of your building following damage. If your property is destroyed, the insured amount should be sufficient to pay for the full cost of rebuilding or repairing the damage. Normally the declared value is based on total loss of the structure.
What happens if the building is underinsured?
Insurers can apply “average clause” in the event of a loss. This will deem you a “co-insurer” for the percentage amount by which you are underinsured. For example, if your property is only insured for 80% of its true reinstatement value, your insurer may only pay out for 80% of the claim, even if the total claim is less than your insurance value.
Is your reinstatement value out of date?
Relying on an out-of-date reinstatement valuation can be troublesome. If you do not conduct regular valuations, you are at risk of underinsuring your property. In the event of a claim, you would have to foot the shortfall in the bill. On the other hand, if your property is over insured you will end up paying higher premiums than necessary.
How can you check the accuracy of your valuation?
It is advisable to instruct a Chartered Surveyor to evaluate your property and to provide a precise and accurate reinstatement valuation, based on construction methods and regional differences. This will ensure your insurance is as accurate as possible to the true value of your property.
Fairhurst Estates Ltd has recently undertaken a reinstatement valuation exercise for a retained client. On average the sum insured was 16% lower than required.