Many businesses prioritise insurance and seek advice as to what covers they should consider in the event unforeseen event occurs given rise to a claim but we frequently find clients take a casual approach to their valuations and risk assessment aspect of their insurance.
Having accurate valuations underpins the basis of insurance but clients often disengage and neglect this aspect fearful that it may lead to higher premiums and further cost and time obtaining a valuation report.
What does the common lease advise?
Lease agreements commonly make specific reference to costs that freeholders and property investors can recover from leaseholders. Like insurance, the cost for a third party to conduct a rebuild or reinstatement valuation, can be passed on.
The consequences of not getting the correct value in place cam result in underinsurance and have severe consequences if the Average Clause is applied if a partial of total loss occurs with claim payments being reduced by many thousands of pounds.
What is ‘Average’ and how does if work?
Put simply this clause allows insurers to adjust their claim settlement proportionately to the value provided (deliberately or not) which was inadequate to the cost of reinstating the property in the event of claim.
For example: if a commercial property has a rebuild value of £2m but is insured for only £1.5m and a claim occurs costing £500,000, the insurer will pay £375,000.
Market value vs Rebuild/reinstatement value
A property’s ‘market value’ bears no relevance to the rebuild or reinstatement value as a market value accounts for supply and demand and most importantly the value retained in owning the plot of land that a building is erected on.
Access to Specialists
Horner Blakey Insurance Brokers work with a number of specialist surveyors who are able to provide either desktop assessments or in larger cases, visit premises to provide a comprehensive Rebuild Cost Assessment to ensure you are not overpaying for buildings cover, but also have the basis correct.
For more information please contact Horner Blakey on 020 7929 0108.
