Growing risk of underinsurance – Landlord insurance

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Don’t be fooled by reducing your insurance on your building! Underinsurance is a real risk. Most landlords don’t understand that if you under insure your property you may find a huge short fall when it comes to the insurance.

In the words of the financial conductor of authority there is already “an alarming degree of underinsurance, both businesses and consumers, creating issues throughout each area of the property sector.”.

For example if the rebuild cost of the premises is £200,000 but the insured is only insured from £100,000 you are under insured by 50%. There will be an average clause in your policy which therefore may reduce the sum insured by 50% leaving the policy holder with an insurance payment of only £50,000! Saving a few pennies by reducing your sum insured could cost you thousands in future.

We have teamed up with a company that can offer you a ball reinstatement valuation of your property. This is accepted by the Royal Institute of Charted Surveyors and will give you a proper valuation of the rebuild cost for your property. The cost is £160.00 but it could save you thousands. Contact us here to discuss it.

Whilst the above is simplistic people often fail to take into account all issues surrounding the scope and extent of any policy of cover in place.

Perhaps it has never been more apparent in the current economic climate where society and businesses alike are being impact by supply chain shortages and increased prices of materials.

These factors have significantly contributed by both Brexit and the ongoing global Covid-19 pandemic. One needs to look no further than the recent extended queues at petrol station forecourts to see the evidence of this.

What does this mean for you for your property and what does it mean for the insurers, suppliers and the rebuild costs?

Underinsurance.

One of the biggest risk presented by these particular issues is underinsurance. What some may be aware of, is that the responsibility of the policy holder, to insure they take out sufficient levels of cover for the insured risk when accepting a policy of insurance.

When you first purchase a property you normally have a insurance valuation as part of the survey. But when you have owned a property for some time people often don’t realise that they need to review it on a regular basis. We have teamed up with Rebuild Cost Assessment and are able to provide you with this cost at £160.00. We will deal with all the documentation for you and all the usual forms. It only takes a minute or so of your time to obtain the information and we can have the full rebuild cost with you within 7-10 working days. This fully covered by the Royal Institute of Charted Surveyors and don’t hesitate to contact us regarding the details here.

What you may not be aware of it is your responsibility as the policy holder to ensure you have enough policy of insurance.

What is policy avoidance?

This is in effect where you are not covered at all in any pay out.

The comment that the claim is covered by insurance but this can be well clear of the mark. The insured could be left in a position whereby there are without any premises and potentially out of business. For example the first of reinstatement of a building, underinsurance principles can apply equally to all insured losses. It is therefore critical that cover levels taking out an exemption and renewal actually reflect the risk. You would also need to ensure that the sum insured is regularly reviewed.

It is not good enough now a days to have the “best guess”. Especially to estimate the true cost of reinstatement of a property. It may have been sufficient in old times but assessment is now made to be more difficult. Especially with the uncertainty of Brexit and the pandemic.

The UK’s decision to leave the EU has advertising affected the source of materials and available labour. Which had previously relied heavily on its ties to Europe.

Any fall in the value of the pound, the euro or the dolla is also going to result in increased costs for the importation of materials and plants and machinery.

Ensuring your property is not underinsured.

Underinsurance risks often the late to replacement of the property where the costs relates not only to the rebuilding of the property itself but the consequential interruption.

The list below is often items that would be included when looking at the figures;

Cost for planning

Permissions

Site clearance

Digging

Construction and fit out

Old projects

Alternative premises potentially in the meantime

Insuring the property for the rebuild cost not the market value

Any extension, changes or extra buildings that may have affected your sum insured and you have not changed it

Top 10 indicators where you could be underinsured.

  1. The building is listed, made of stone or other nonconventional material, or was constructed prior to 1920.
  2. Your building has not had a professional valuation within the last three years.
  3. Your home has recently been altered or extended or is in an unusual location, perhaps with restricted access.
  4. The property is finished to a significantly higher standard than normal or has ‘eco-friendly’ features.
  5. The value of your property is based on developer’s costs, which are often much lower than one-off rebuilding costs due to economies of scale at the time of build.
  6. Not index linking the property.
  7. You haven’t factored in costs for outbuildings, car parks, driveways, gates, fences, boundary walls, paving or lighting.
  8. You haven’t factored in any improvements you have made to the property.
  9. Not taken into account professional fees for the property including site clearance and access.
  10. The current increase in costs due to Covid

We have teamed up with a company that can offer you an online valuation service. We need some minimal information from you in order to get you an up to date valuation of your property. The cost is £160.00 and you will receive a Royal Institute of Charters Surveyors report.

Covid – 19 uncertainty.

The pandemic.

This has been exaggerated by the pandemic which has resulted in the closes of a number of manufacturing plants. Where there are employees having to self-isolate or limit their interaction in the work spaces. Businesses have seen a reduction in access to workers available to service any orders.

You may have even found out yourself there is a delay in materials being produced and supplied. Therefore a potential increase in the cost. There is a major lack of physical labour especially in various sectors which is increasing the costs overall.

All of these issues will continue to have a natural impact on the construction and insurance industry. It will increase time and cost to reinstate and repair premises damaged by insured perils.

Not only are we seeing an increase in the cost of materials. But also, the length of time necessary to affect reinstatement of the properties this is also increasing.

These can all have multiple effects on consequences for additional elements of insurance cover. Such as business interruption, an inadequacy of any insurance taking over to cover these losses.

There is potential for insured business to stock pile goods in anticipation of issues associating with supply change.

It is an inherent risk for landlords, property owners, lessee’s, freeholders and anybody that owns a property.

What can be done?

Check that you actually have the correct amount of your property being insured for. This should be revied on a regular basis, why not contact us to discuss this. We can be contacted on 01273 827090 or enquiries@iinsure365.co.uk .

We have lots of different policies that we can help you with and cover and we insure companies such as RTM, rental companies, houses into flats and many more. The policies often include loss of rent, accidental damage and alternative accommodation and we can compare quotes for you. You can get an instant quote for your residential here. Why not contact us on 01273 827090 or enquiries@iinsure365.co.uk

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