As market conditions continue to increase construction costs, Tom Burton, an associate and chartered building surveyor at Bruton Knowles in Nottingham, is warning property owners that their insurance cover for reinstatement value needs to be sufficient – or they face underlying risks.
He said: “The risk of total loss as a result of a fire is ever present for property owners if they don’t have insurance, with the recent catastrophic fire destroying the student accommodation block on Player Street, Radford last year emphasising the risk.
“This fire served as a stark reminder about the importance of ensuring adequate buildings insurance cover is in place. With many insurance providers placing the responsibility on the policy holder, it is critical that full consideration is given to reinstatement values, to avoid a loss being suffered as a result of inadequate cover, should the worse happen.
“With construction costs increasing year on year, relying on an old reinstatement value is risky and will likely result in inaccuracies, possibly with no point of liability, if a loss was to be realised. Alternatively, an over-estimation will likely result in a higher insurance premium, that might not need be incurred.
“In order to avoid these risks, it is important for those obtaining insurance that they are constantly updating their cover. Reliance on the market value of a property will often prove insufficient, with the difference between market value and rebuilding costs coming as quite a shock for many.
“Whilst an insurance provider might benefit from increased premiums, it is not only in the insurer’s interests to recommend or insist on a review of the cover – it is in the policy holder’s interests too and more significantly so.
“My advice would be to undertake a comprehensive assessment of insurance cover every three to five years, or when undergoing alterations or changes to buildings. Whilst professional input isn’t without cost, the benefits realised in employing advice often outweigh these costs many times over, particularly where construction abnormalities and sizeable portfolios exist.
“Those responsible for insuring property need to protect their assets and ensure they have thoroughly understood the terms of their policies. The application of a complete, knowledgeable approach will ensure that full and appropriate cover can be put in place and the risk of suffering a loss carefully managed, if not completely diminished.”