WITHOUT THE RIGHT LEVEL OF BUILDINGS INSURANCE, YOU COULD BE LIGHTING A FUSE UNDER YOUR BUSINESS. TOGETHER, WE CAN STAMP OUT THE CHANCES OF DISASTER.

The price of getting it wrong

A retail outlet within a shopping centre, that owned its premises, recently suffered a serious fire causing damage. The estimated repair cost was in excess of £100,000.

When the Loss Adjusters acting on behalf of the Insurers attended the site to assess the nature and extent of damage, it was also identified that the sum insured available was inadequate and only represented some 70% of the total cost of reinstatement of the property. As is normally the case with commercial insurances, the policy was subject to an underinsurance penalty, usually known as Average. As a result, the settlement proposal made by the Insurers included a hefty £30,000 reduction from the total cost of making good the damage.

Had the retail outlet reviewed their buildings cover any shortfall would have been likely to have been picked up before any claim occurred, giving the retailer not only the satisfaction and peace of mind that they had ample buildings cover, but in this case no shortfall in funds.

Property owners beware

Many successful businesses across the UK own property with portfolios of varying sizes.

Mr O has such a portfolio including 15 residential properties that he let to tenants. This provided him a nice steady annual income. When the tenant of one of his properties discovered the presence of cracking, it quickly became apparent that there was a potential subsidence problem. This was found to be caused by the close proximity of trees and vegetation, the roots of which were undermining the ground beneath the foundations, which is a common cause of subsidence damage.

Whilst an insurance policy was in force, which included cover against subsidence damage, in setting the sums insured for the various buildings, Mr O had relied upon his own knowledge of property instead of seeking professional advice. It was found that the sum insured of £180,000 was woefully inadequate for reinstatement purposes, the insurable value being assessed at £315,000. The net result was that Mr O was left to fund over 40% of the ultimate repair costs.

The situation could have easily been avoided had Mr O regularly reviewed his buildings insurance and invested in having a professional Reinstatement Cost Assessment completed - which his insurance broker would have been key to. Additionally his broker could have negotiated a discount by having the entire portfolio reviewed at the same time.