21 December 2015 - Buildings should be insured for their reinstatement value which includes the costs of demolition, rebuilding and professional fees etc.If a building is under-insured, the insurers may apply 'averaging' to any claims. For example, if your building is insured for say £80,000 and the insurers collect that the correct reinstatement value should be £100,000, then any claim payout, no matter the amount, will be reduced by 20% to match the level of under-insurance. This will apply to all claims, not just those for a complete rebuild after extensive damage.If you are over-insured you may be paying too high a premium, any may also have reimbursement claims against you where tenants are being charged for insurance costs.It is therefore essential that your property is properly covered. Whilst your policy may index link the sum insured, it is essential that a measured reinstatement valuation is carried out by a surveyor or architect every 3 years, and sums reviewed annually by a desktop update.
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