With winter now upon us, property damage caused by flooding, burst pipes, high winds or heavy snow is an increasing concern for commercial property owners. Combine this with the recent increases in construction tender prices as the country recovers from recession, and now more than ever it is important to ensure your property is suitably insured.
Under insurance exposes owners to a huge risk and could result in a shortfall in any insurance pay out in the event of a loss. On the other hand, over insurance means unnecessarily high premiums are paid by the landlord or tenant. Against this background, even though carrying out formal Reinstatement Cost Assessments can seem like an unnecessary cost, failing to do so or relying on historic data is a perilous false economy.
Carrying out an expert Reinstatement Cost Assessment and calculating an accurate Declared Value is the key to safeguarding against under or over insurance. Establishing an accurate gross internal area and then measuring and pricing each property individually based on the construction, specification, type and quality of finishes, mechanical installations and electrical services and taking into account issues such as location and access is the only way to achieve the right results. The building’s heritage status, whether it is in a Conservation Area or the presence of hazardous materials are also important considerations that can easily be overlooked.
Once in place, regular reassessment of properties is then crucial to reflect any changes in rebuilding costs, construction techniques and market conditions. Continued updating by means of indexing, whilst convenient and low cost, can result in over inflation of Declared Values and insurance premiums or insufficient cover and exposure to risk. RICS guidelines advise that a full assessment from first principles be undertaken in every third year.
It is too late to avoid the adverse effects of underinsurance once the loss has occurred, so ensure the risk has been mitigated maintaining accurate Reinstatement Cost Assessments.
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