The Importance of using the correct sums insured for buildings cover.
What level of cover do I need for my building is often a question we are asked. Does it really matter whether the sums insured are not actually the true value? What should it be insured at? Is it market value?
These points are all valid and many trustees / committee members face this issue whereby they are required to insure a building, whether it’s a small shed or a large community centre recently built. What sums insured should it have to correctly be covered in the event of a claim.
To understand why it is important to have the correct figures for sums insured it is essential to first know why. All insurers apply a condition known as average to any item covered under sums insured; whether its contents, electrical equipment, stock or building cover, these are all insured under the basis of sums insured. The condition of average states that an insurer will only cover you up to the limit you have noted on the policy. To explain this in a way that’s easily understood we have included two examples below:
If you were to insure a building with a rebuild value of £200,000 at a limit of £100,000 in the instance of a total loss (the building is completely destroyed) the insured would pay out £100,000 rather than look to cover all the rebuild costs including arranging for materials and its re-construction .
If you were to insure a building with a rebuild value of £200,000 at a limit of £100,000 and suffered £50,000 worth of damage, the insurer would only pay out £25,000 given you have insured the building for half of its rebuild value.
Given that by not having the correct sums insured could lead to you not receiving a full pay out in the instance of a claim, what can organisations do to ensure this is a situation they never find themselves in?
Firstly, it may be wise to look at a building survey, which we can assist in. By doing so, especially if it has been 10+ years since the last valuation of your building, you are ensuring that the sums insured is correct and that should anything ever occur, your policy with look to make a full pay out.
Secondly, you may have noted the terms Rebuild Value rather than just ‘value’, this is because more often than not the rebuild value is worth more than the market value given it is including clearance of the site, hire of workers, material cost, electrical, gas and plumbing work to make the building as it were prior to the incident.
Lastly, for any contents owned by the group, it may be wise to have an inventory sheet that is updated and reviewed to ensure the sums insured level for any items your organisation own are correct and that in the instance of a total loss you are not having to look at using your own funds to replace damaged, stolen or faulty items.
If you are now concerned about your building sums insured level then please contact us as we can look to arrange a desktop survey to provide you with an accurate rebuild value ensuring you never find yourself in a situation whereby your subject to the condition of average.
Should you wish to access our services as a specialist third sector broker and would like both advice on your risks, what cover you should hold and what limits would be best along with a range of quotations then please do not hesitate to contact us or alternatively complete our web inquiry form.
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