21.05.08 : Is My Building Adequately Insured

The importance of maintaining adequate insurance cover on your commercial insurance is often taken lightly by business owners. When considering adequacy of asset related sums insured, business owners generally have a good idea of the value of stock, computers, machinery, fixtures and fittings. Setting and agreeing the level of business interruption cover is possible by extracting information from profit and loss accounts and discussing estimated growth over the forthcoming period.

Difficulties can arise when setting a buildings sum insured, which must reflect the cost to completely rebuild, to include demolition, debris removal and all fees. Is the property listed, does it have unusual features or in a difficult location for access? Business owners may have an idea of the market value of the building or what it cost to build when first constructed, but are they qualified to set the sum insured with any accuracy? Probably not. Too often, buildings related claim settlements are reduced because a business owner failed to set his sum insured correctly. Taking time and investing money in a professional survey can save £1000s in the long term.

For example, a manufacturing client insisted on maintaining a buildings sum insured of £400,000, despite our recommendation they review. During the course of the year they suffered extensive impact damage by one of their own vehicles to an external wall of the building and costs to repair were finally agreed at just over £20,000. The appointed loss adjuster surveyed thoroughly and established a correct rebuild sum insured of £1,800,000. As a consequence, the settlement was reduced in proportion with the level of under insurance and finally agreed at £4,500. The cost to the client of failing to correctly insure his buildings was therefore just over £15,500!!

We strongly recommend business owners review their buildings cover at least every 3 years (better every 2 years). Whilst Insurers will increase sums insured by index linking, often this does not reflect ever increasing construction costs. Consider the current increases in the cost of steel.

If you feel a professional survey is required, Henshalls strongly recommend you contact local surveyors, Towler Shaw Roberts, who have recently completed a number of surveys on behalf of existing clients. Their input confirmed that sums insured were not adequate, indeed the one client was able to reduce his sum insured and save on premium spend. To contact TSR please follow the link below and contact Dave Heath at their Telford office.

http://www.tsrsurveyors.co.uk/

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