NDML cannot place enough emphasis on our clients to set their sums insured correctly, currently if you choose not to insure your buildings at the correct reinstatement value then your insurers will apply average in the event of a claim. This would mean that any settlement would be reduced in proportion to the amount of underinsurance. This applies to ALL claims and not merely total losses.
NDML recommend that all our client’s arrange a comprehensive building valuation at least every 5 years, NDML cannot advise you on what to set your sums insured at as we are not qualified Chartered Surveyors. The sum insured that you declare to insurers should represent the cost to reinstate the building i.e. rebuild it, not just the market value, other considerations are:
1. Include debris removal – identification of asbestos in a building can significantly increase the cost of debris removal at the time of a claim.
2. Don’t forget demolition and professional fees – think about clearing the damaged structure and the professional fees associated in its re-building, its not just the cost of a new building.
3. Understand Building Regulations and Legislation – additional features (i.e. lifts, disabled access) may have to be installed during reinstatement, even though they were not there prior to the loss.
4. Identify Listed status – This can have huge ramifications on the cost of reinstatement due to the requirement to source original materials.
5. Include everything – internal features, outbuildings, car parks, boundary walls, (this is not an exhaustive list).
6. Maintenance of an inventory – or an asset register, helps identify the quantity and value of plant, machinery and equipment stored in your premises.
7. Is the equipment obsolete? – If an item is difficult to replace, the cost of its replacement may well also be higher than you may expect.
NDML work in close partnership with a Chartered Surveyor who can undertake a valuation of your premises at a very competitive rate, please call us now for more information on 0844 488 9205.
Examples of Under insurance found following a valuation by our nominated Chartered Surveyor
Venue X Sum Insured £750,000 Valuation £1,875,000
Venue Y Sum Insured £720,000 Valuation £1,370,000
Venue Z Sum Insured £600,000 Valuation £1,100,000
If for example the following Venues had a claim, the following formula would be applied
Venue X suffers a Theft Loss – £10,000
Payment received would be calculated as follows:
= £4,000 – policy excess of £250 = £3,750 paid by insurers.
The venue need to find £6,250 from their own funds to pay for the underinsured element of the claim.
Venue Y has a relatively serious fire:
= £157,664.23 – policy excess of £250 = £157,414.23 paid by insurers.
The venue now has to find the remaining £142,585.77 from their own funds to pay for the underinsurance.