Shocking number of commercial properties underinsured
As a commercial property owner, one of your worst fears is discovering a flooded kitchen from a faulty boiler, damage to your building’s structure due to extreme weather or even to find a faulty appliance has caused a fire.
Here, Managing Director at independent insurance broker Russell Scanlan, Bryan Banbury, and Director at building insurance valuation specialists BCH, Martyn Barrett, discuss how a surprisingly large number of commercial property owners – with both small and large portfolios - are underinsured for such eventualities, and offer some advice on how to avoid being ‘caught out’ with a building insurance claim.
The natural and sensible immediate reaction in a stressful and surprising scenario such as a flooded property is to contact your insurer and initiate the claim process. However, this is the point at which a staggering number of commercial property owners discover that they are actually underinsured – and that their policy does not cover the damage in full.
Bryan said: “Comprehensive cover provided by a tailored policy selected by your broker ought to ensure you are entitled to claim fully, but more and more we are finding that new clients who are commercial property owners are underinsured and, even more worryingly, wouldn’t have realised they were underinsured if they hadn’t come to us.”
Martyn adds: “The question ‘am I covered enough?’ is the crux of the matter. If you are not, then there could be a crippling shortfall in the pay out from your insurer if catastrophe hits, either because your policy limit has been totally exceeded or as a result of the application of average. Average is, put simply, applying a percentage reduction proportionate to the amount insured, compared with what the property ought to have been insured for when the policy was taken out. It’s no good trying to change the value after the event- insurance doesn’t work like that.
“Scarily, 94 per cent of the cases we have seen for Russell Scanlan clients are underinsured. The average increase is 60 per cent and the highest increase on a single case we’ve dealt with was 245 per cent.
“This high incidence is down to Russell Scanlan’s vigilance in spotting underinsurance and putting the subject high on its agenda. Across the board, we would normally except the number of underinsured commercial property owners to be 65 per cent – but Russell Scanlan is switched on to the issue and as such their percentage of these cases is higher.
“In order to be ‘covered enough’ and therefore to put your mind at rest for all eventualities in terms of loss or damage in and to your property, you need an up-to-date insurance valuation, known as a reinstatement cost assessment. RICS suggests this is reviewed every three years. Often if this assessment is brought to your broker’s attention, they may be able to arrange a policy without the average condition on it at all.”
Bryan added: “Getting the right insurance policy and the up-to-date property value on that policy should enable property owners to sleep easily and to have an expectation that a valid claim will be paid without reduction, should the unthinkable happen.”
A fully compliant RICS insurance reinstatement cost assessment (RCA) is now very affordable and should give the property owner the peace of mind.
If you would like some advice about your current building insurance policy, you can contact Russell Scanlan’s team of experts on 0115 947 0032 or BCH’s valuation team on 01455 293510.