Sometimes it's over!
Underinsurance tends to get all the headlines when it comes to inaccurate building sums insured, but sometimes it’s ‘over’ too.
Our most recent review of over 11,000 UK properties revealed that 79% were underinsured, a problem which can lead to bitter claims disputes involving property owners and managers, insurers and brokers. However, let’s not forget the 14% of properties found to be overinsured, on average for 121% of the reinstatement cost.
One such overinsured property recently fell under the stewardship of Sean Eckton, who is director of Southampton based HMS Property Management Services Ltd, which manages blocks of apartments. Around one year ago Sean took on a block which had exercised its ‘right to manage’ – a time when issues around insurance coverage often come to light.
Sean asked us to carry out a full site survey of the building, as it had an estimated rebuild cost at the time of £17 million. Our report revealed the property had a rebuild cost of £14 million, £3 million less.
“Their annual insurance premium was expensive at around £28,000, especially as they had a poor claims history, with several water ingress incidents,” said Sean. “The premium went down by around £3,000, which meant the service charge could be reduced for everyone in the block.”
Sean is more than aware that overinsurance is by far the less likely outcome: “On the flip side, we recently took on a property and felt it was remarkably low on the buildings insurance and so we had a desktop assessment carried out,” he told us. “Yes, they were way under and therefore we increased the cover, which is just as important, if not more so!
“You certainly don't want to be in a position where an insurer comes back to you and says, look, you’re underinsured, we're going to have to deduct that percentage of a claim, which they would do.”
Sean also had some interesting things to say about a leasehold property enquiries form, known as an LPE1: “One of the questions that is now part of LPE1 form, which was put together in conjunction with the Law Society, RICS and the Council of Mortgage Lenders, asks about when the last buildings insurance valuation was completed,” he said.
“Having an affordable valuations provider that is easy to work with means we can simply set a reminder to ensure all blocks are looked at every three years.”
Hear in more detail what Sean had to say on our Zoom call about over and underinsurance, by watching the video at the top of this page. Whether you're a Property Owner, a Managing Agent or an Insurance Broker, ordering online with RebuildCostASSESSMENT.com is easy. Just start at our home page and visit the section that's right for you.