Buildings Insurance – Setting the Sum Insured
When purchasing buildings insurance, it is up to you to make sure that the amount you insure for represents the full value of your property.
For buildings, this means the full cost of rebuilding your property, including any outbuildings. You also need to think about any extra costs involved in rebuilding, such as demolition, Architects’ and Surveyors’ fees. There could also be additional costs in meeting the requirements of your Local Authority.
It’s important that you insure for the full amount as the sums insured are the maximum payouts for any claim.
Guide to Insurance Rebuilding Costs
This is a brief guide to the assessment of a sum insured for buildings under a commercial insurance policy. You should always seek the advice of a qualified Surveyor when determining your buildings sum insured.
What is included? (basis of valuation):
The basis of valuation is that the assessments will include all items except lessees’/tenants’ contents.
Specifically, the valuation will include:
- Any property permanently fixed to the building (eg for domestic properties, Kitchen & bathroom fittings)
- Fences and gates
- Paths and driveways
- Swimming pools (including heating and filtration equipment)
- Site clearance
- Architects’, Engineers’ and Surveyors’ fees
The rebuilding cost will be the cost of demolishing and clearing away the existing structure (including the items referred to above) and rebuilding it to its existing design in modern materials, using modern techniques, to a standard equal to the existing property and in accordance with current Building Regulations and other statutory requirements.
Where buildings are listed, or in a conservation area, allowance will be made for reconstruction in accordance with the likely requirements of the Local Authority. Allowance will be made for replacement of the foundations and for temporarily making safe the damaged structure. In the case of attached structures (e.g. terraces) allowance will be made for half the cost of replacing party walls and for the cost of protecting adjoining structures.
Allowance will be made for professional fees payable in connection with the re-building of the property.
No allowance will be made for credit for salvaged materials.
No allowance will be made for inflation during the currency of the policy or in any subsequent period before rebuilding is completed.
Although a rebuild valuation will specify the rebuild cost as at the date of valuation, you should make allowance for cost inflation when determining the actual sum insured. Costs are likely to rise during the currency of the policy and this should be allowed for when setting the sum insured. A buildings claim could be made towards the end of the policy period, meaning that the actual reinstatement may take place well into the subsequent period of insurance. Costs could have risen significantly during that time. The sum insured against which those costs would be assessed, is the building sum insured set at the start of the previous policy period.
It is advisable to obtain a professional valuation for your property to ensure that you set your buildings sum insured correctly. We have negotiated discounted rates with Barrett Corp Harrington (BCH) who would be happy to help in this respect. For further information please contact us.