ThEImpoRTANCEofCoRRECT pRopERTy vAlUATIoN
The importance of correct property valuation? Don’t forget to regularly checkthatyoursum insuredisadequateto cover major damage to your block, warns ROGER CORP
In recent yearsand as reported in thepress, therehavebeensomeveryserious fires in blocks of flats in theUK. Followingthe recent stormsand with the advent of the usualwinterrelated claims,many property owners will be lookingtoclaim therepair or reinstatementcost fromtheirinsurance company.
Most claims will be relatively minor and settled quicklyinthishighlydrivenservice marketwithout insurers questioning the adequacyofthe suminsured.However, larger claimswillbesubject to close scrutiny andaproportionwillbefound to be significantlyunderinsured, resultingin a significant shortfall in theamount paid by the insurance company.
Of allthe valuations conductedbyBarrett Corp&HarringtonLtd,involving billions of pounds worthofproperty, morethan75% are found to be underinsured.
Thereasons aremanyand variedbut often the origin of the suminsured is totally unknown. Somerely on inappropriate advice,rules of thumbormarketvalue or just take theview‘it will neverhappento me’. In addition, theinclusion of VATisalso often misunderstood and overlooked*.
Sometimesthere is simply afailure to update apreviousvaluation or thefear that if thebuilding is valued andthere is an increase,there will also be an increase in the premium. In fact, any premium increase will be insignificantcompared to the potential financial impact of underinsurance in theevent ofamajor claim.
Although very comprehensive in their cover,most insurancepoliciesthatdeal with blocks of flats aresubject to the ConditionofAverage,whichmeans that in theevent of underinsurance andpartial damage,theamount paid will be in proportion to thedegreeofunderinsurance - see example opposite.
In additiontothe financial penalty,which canbedevastating,underinsurancecan also lead to disputed,protracteddiscussions andofcoursedelay in reinstatingthe building. Any additional costs resulting fromsuch delaywillnot be coveredbythe insurancepolicy.
16 Flat Living GUIDETO INSURANCE
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