Commercial property owners should review the value of their buildings to ensure that the sum insured is enough to repair any damage, Aviva has warned.
Underinsurance is a real risk for property owners, Aviva has said, as research has found that 77 per cent of professionally valued buildings are actually underinsured, putting commercial property owners' investment at risk.
There are some usual suspects that are often missed out of valuations, Aviva has found; the sum insured – the amount it would cost to completely rebuild the property – should include the costs of removing debris, as well as architects' and surveyors' fees.
Aviva is concerned that the recession will add to the number of businesses which are underinsured, because while property values might have fallen, the cost of rebuilding has not reduced to the same degree, and some business owners might be taking advantage of lower property values to cut the cost of their business insurance premiums.
"In fact, as we come out of the recession, the cost of reinstating a building is anticipated to increase as the demand for raw materials, energy and labour rise," says Mark Dunham, underwriting manager at Aviva commercial property.
"We have seen an increase in the number of properties that are underinsured during the recession but when money is tight and companies need to reduce costs it's important that this is not at the expense of their insurance cover."
Mr Dunham said that insurers sell "peace of mind" to businesses and should the worst happen, having commercial buildings insurance in place can make the difference between being able to claim successfully and repair the damage done or not. Furthermore, directors, trustees or others responsible for arranging insurance could find themselves liable if there is not adequate cover in place.
Martyn Barrett, director at specialist insurance valuer Barrett Corp and Harrington, working with Aviva, said, "in a major claims scenario, this degree of underinsurance can be devastating, especially as the majority of businesses never recover from a major loss such as a fire."
Mr Dunham added: "When assessing the amount needed to adequately insure buildings, it is also important to understand what is included in the insurance policy definition as this may include a wide range of ancillary items such as walls, gates, fences, garages and other outbuildings. These items are frequently forgotten but must be taken into consideration when calculating sums insured."
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