Your insurance rebuilding cost will typically be based on a historic figure, which is often adjusted on an annual basis. The result of this can mean many properties are over or under-insured, meaning the insurance costs being excessive or have inadequate cover.
With a steady increase in construction costs in recent years due to a rise in costs of building materials, we have also seen notable increases in the costs for development for primary care providers due to the specialist nature of buildings in this sector.
What does this mean for primary care providers?
If your insurance rebuilding cost is excessive, you will be paying an unnecessarily high premium and this will be further compounded by rising premiums seen over recent years.
Of more concern, is under insurance and this is when the rebuilding cost is too low. Should you need to make a claim your insurer will typically apply the ‘Average Clause’ as their way of making sure you only get what you are paying for.
Regardless of the size of your claim the Average Clause will apply. If you have insured your building for a rebuilding cost of £1m but upon claim an assessment by the insurer’s loss adjuster finds it to be £2m you have only insured 50% of the rebuilding cost (less any excess). In this example, the best outcome would be the insurer meeting 50% of the claim (less any excess) but underinsurance can also invalidate a policy in some instances and this means there is no cover.
For example, we are currently assisting a surgery where the property flooded over the weekend as a result of the water tank in the loft being faulty. Water damage is extensive and has affected the whole property making it uninhabitable. The property was insured for less than 50% of its value, which has resulted in the parties having to find significant sums of money from their own resources to repair the damage. It remains a real possibility that the surgery premises will need to be closed and the patients redistributed as a result.
How we can help
We appreciate most property owners are not rebuilding cost experts, but it it is your responsibility to inform your insure how much your property rebuilding costs need to be. Our expert team have a wealth of knowledge and experience in this area and can provide assessments and advice.
Written by John Clark BSc (Hons) MRICS, Associate Director. Please get in contact with John for any queries on our range of primary care property related services including development, valuation and property management via phone on 0144220820 or email: John.clark@argoup.co.uk
