We are witnessing the substantial rise of building under insurance and the associated reduction of pay outs.
These sums can turn out to be quite some loss to the insured.
An insurance payout will reflect the level of under insurance of your building reinstatement cost valuation. If your property is under-insured by 25%, you will only receive 75% of the cost to repair or rebuild.
The reduction is carried out by insurers due to a ‘clause of average‘ stipulation, which is contained in almost all insurance policies. Under insured = reduced payments.
A Building Cost Information Service (BCIS) research report revealed that 80% of properties were under-insured. Sums insured consistently fall behind valuations by at least 20%, if not more, according to the Association of British Insurers.
The Chartered Institute of Loss Adjusters estimates underinsurance to be present in over 40% of claims.
Property under insurance has been an issue for several years, as many property owners have never had a professional rebuild cost assessment carried out for some time.
Building Regulations requirements have increased substantially and construction inflation has been an issue since Brexit.
Most of these inaccurate sums insured have then been carried across from year to year as the basis for their insurance renewal.
The historical inaccuracy of reinstatement cost valuations has been exacerbated by the unprecedented inflationary pressures which continue to take place in the construction sector, including:
Rising Building Regulations requirements – especially with regard to improving energy performance
Supply chain issues – rising costs of imported materials and a labour shortage over the last few years are a key factor in the high construction cost inflation that we have been witnessing since Brexit and Covid
Ukraine conflict – further disruption to the supply of materials and rising energy costs across Europe has further increased material and building costs
According to the Royal Institution of Chartered Surveyors and leading insurers, ideally every building should be revalued for building reinstatement cost valuations at least every five years.
Revaluations will take into account changes to building regulations, recent variations in pricing and any alterations undertaken to the building.
Signature Surveyors comply with the Royal Institution of Chartered Surveyors Professional Standard Reinstatement Cost Assessment of Buildings to calculate insurance values for businesses and homes.
Contact us for some free advice, or assessing if you are adequately insured, on 01892 710765.