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How do I know if my buildings sum insured is correct and is it important?
I’m sure we all intrinsically know that we should insure our buildings for the right amount, but how on earth are we supposed to know what the right amount really is?
Over the years I’ve discussed this with clients on many occasions and heard a variety of opinions from “surely it can’t be more than what I paid” to “my building company can do it for x.”
The reality is that the Royal Institute for Chartered Surveyors publish national guidelines on rebuild costs for different types of properties, based on regional variations.
This is the index which insurance companies use when assessing whether a property is correctly insured.
The consequences of underinsurance can be severe as the insurers will proportionately reduce any claim settlement in line with the amount of underinsurance.
Therefore if the building is deemed to be 50% underinsured your claim will be reduced by 50%, even if the claim is only for partial damage.
In my experience most building sums insured are below where they should be unless they are regularly reviewed.
In order to ensure accuracy I would always recommend speaking to your local chartered surveyor. They have a wealth of knowledge and generally don’t charge as much as you might think. They may also be able to do a desktop survey, which will be more cost effective.
If you are insuring a large portfolio of properties it is also worthwhile discussing this with your insurance broker as they may be able to get support from your insurers either with their in house survey team or contributing to the valuation costs.
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