How your car park can make your building underinsured

Ask anyone to describe their home or place of work and they will often talk about the structure that they live or work in.

Therefore, when your insurance broker asks what the cost would be to reinstate your buildings, your mind would naturally think in the above context. What your insurance broker should have explained, as a precursor to the question, is that in all insurance policies there are a set of definitions of certain words within the policy/contract that sets out how the policy is to be interpreted by both parties. Insurance policies generally will have a far broader description than something that has a roof and walls. For example, the Aviva Small Business Property Owners policy wording includes the following:

As you can see, this is far broader than you would initially think. Some areas, such as carparks or hardstanding, might not even register when you’re thinking about risks that could damage your business as they’re unlikely to be damaged via storm, flood, or fires etc. But insurers will take them into account when assessing whether you have set an adequate declared value when a claim is incurred.

You should be aware of the average condition. This can have a significant impact in the event of underinsurance in terms of claims settlement figures.

This area was already a problem for most organisations but, when you couple this with the increased inflation we’re seeing within the building industry brought about by materials costs, labour shortages and global supply chain delays, the problem is compounded. All of this could make a rather nasty cocktail that leads to significant underinsurance which would be catastrophic for your business, even if you have a market-leading insurer and policy wording.

The impact of this is that it could significantly reduce the amount insurers will pay in the event of a loss to reflect the shortfall, putting your business in a situation where it is paying out further costs that haven’t been accounted for.

Business owner – “Okay Tim, you have me worried. How do I fix it?”

This is not something that you can ask an informed friend about; advice must be sought from a professional reinstatement company. At Aston Lark, we take the setting of correct declared values seriously, and have partnered with Barrett Corp Harrington (BCH) to provide solutions to our clients with prices starting from £99+VAT.

Ultimately, using a professional company to provide reinstatement valuations is going to be an additional cost for your organisation and there will be increased premiums following the increased declared values. But surely it is better to be sure the premium will be an accurate reflection of the actual value at risk?

Although most buildings turn out to be underinsured, there have been instances where the sum insured is too high, meaning the client is overpaying for their insurance –and no one wants to be paying too much for their insurance premium.

The industry recommends getting your buildings valued on an annual basis to ensure you’re fully protected or not overpaying for cover you don’t need. If your broker has not challenged your building declared values in the last couple of years, then please contact your usual broker, or contact us here.