It is evident that construction costs have risen over the past 18 months, which is why it is imperative that you are covered for the right amount.
Fisher Wrathall Surveyors of Lancaster have found that a large proportion of commercial properties are underinsured, with several factors being the reason for this including the increase in construction and labour costs over the past 18 months, misconception of how the rebuild cost should be valued and the use of previous rebuild costs on renewals.
The team has seen a recurrence of clients renewing their building insurance, on historically calculated reinstatement values, meaning their properties are not covered for the right amount.
For example, one of their clients was found to be underinsured by more than 30%. This was mainly due to the significant increase in construction and labour costs since we have emerged from the COVID 19 pandemic.
As well as underinsured properties, Fisher Wrathall Surveyors have found some properties are over insured, with both scenarios being due to the misconception that property owners should insure their property for the ‘Market Value’.
However, this is far from the truth as the market value has no association with the cost of rebuild. The market value is the amount the property would sell for on the open market.
*What are the consequences?
There are consequences to both underinsuring and over insuring.
Over insured: Of course, It is better to be over insured than underinsured, but you will likely be paying more for your insurance than you need to.
Underinsured: This can have severe consequences. The insurers are likely to assess the extent to which the property is underinsured and reduce any payout for a claim by the percentage of underinsurance.
Fisher Wrathall Surveyors aim to make sure clients have the correct assessment to calculate the rebuild value which in turn ensures that their clients are not overpaying insurance premiums, or left exposed to being underinsured.
As a Royal Institute of Chartered Surveyors (RICS) regulated firm, their reinstatement cost assessments are trusted in the market.
If this is something which may concern you, please do not hesitate to contact Fisher Wrathall Surveyors at 82 Penny Street, Lancaster LA1 1XN. Phone 01524 900955.