Over the last two years we have seen a huge strain on supply chains with both increased costs and many goods and materials in short supply. The Royal Institute of Chartered Surveyors reported recently that the costs of building a 3 bed-roomed semi-detached house has increased by 14% between January and September 2021 alone Construction materials cost increases reach 40-year high (rics.org). ‘The pressure on materials prices and availability is expected to continue until at least the end of 2022.’ This is something that can create a real problem for clients purchasing buildings insurance for either personal or commercial premises.
When did you last review your building sum insured and calculate the true reinstatement cost? At Park we ask our clients to review this each year but now more than ever before you need to give full consideration as to how much it would cost to reinstate your buildings in the event of a claim.
The building sum insured needs to be regularly reviewed and kept up to date, it becomes even more important in times of spiralling costs. Do this before a claim occurs to avoid any issues with under insurance and to ensure that an average clause is not applied by your insurers to any claim settlements. Averaging can be applied by insurers in the event of any sized building claim – it doesn’t just apply to large claims or events that result in a total loss of the building.
– Your Building is insured with a reinstatement cost of £1,000,000.
– Storm and high winds damage the roof resulting in a repair bill of £60,000.
– A loss adjuster is appointed and he calculates the full reinstatement costs to be £1,500,000.
This would result in averaging being applied and the claim settlement being reduced by the percentage of the shortfall in sum insured. In this example, the sum insured is 33.33% lower than the actual reinstatement costs. This would result in the claim being reduced by the same 33.33% meaning that only £40,000 of what is a £60,000 roof repair would be paid by insurers.
To help our clients avoid this happening to them we encourage them annually to review their sums insured and always consider if they have adequate reinstatement costs. These should not only cover the rebuild, but also costs for demolition, site clearance and legal/professional fees. It’s not always easy to do this, so to assist in this calculation we have teamed up with Pinnacle Loss Adjusters who are able to provide our clients with a desk top valuation and calculation to guide you towards the correct reinstatement value for your building.
This valuable service is available to all of our clients and if you’d like and further details please contact any member of our team and we will be happy to discuss this further with you and either assist you ourselves, have Pinnacle Loss Adjusters assist you or put you in touch with a Chartered surveyor.
If you would like further details please get in touch – we are here to help and always happy to do so.
David and the team at Park