The team at Barrett Corp Harrington discuss the vital responsibility Property Manager’s have to keep their building suitably insured.
Under the terms of a lease, a freeholder normally has to ensure that a buildings sum insured is correctly stated and is regularly reviewed to maintain continued adequacy. A leaseholder can therefore expect that this is sorted and that, at the time of loss, not only will there be sufficient funds to pay out for the damage to the building, but also that cover is placed with a reputable insurer. The proceeds of the claim will be put towards the reinstatement of the leased property, for the joint benefit of the freeholder and the leaseholder.
Dependent upon the terms of engagement, but more often than not, the responsibility to maintain insurance cover at the right level, sits within a property manager’s remit. So, checking the insurance value on a regular basis is just as important as maintaining inspections for lift engineering and fire safety.
What happens if cover isn’t maintained?
Should the insurance values be found to be lacking at the time of claim, then it is likely that the whole process could be delayed, whilst it is decided whether all, or only part of the claim will be paid, instead of moving on quickly to get back to normal and getting the repairs underway.
In these tougher times, BCH is seeing more insurers requesting post-loss building insurance valuations to check adequacy.
Inevitably, this will lead to claims spend by insurers being reduced.
How can BCH help?
For over 14 years BCH has worked alongside its Property Manager partners to create diary systems which alert them as to when the next inspection or review is due in plenty of time before policy renewals.
This makes sure that not only are the figures maintained at correct levels but that frequency of review of insurance values are met to satisfy the condition for Average Waiver Clauses within policies. (Average is a way in which insurers may reduce claim values proportionately if a sum insured is found to be inadequate at the time of loss).
Everybody should be happy.
Leaseholders can sleep easy knowing that cover is set at the right level…not too high but, more importantly not too low, and valid claims will be paid without penalty for underinsurance.
BCH believes that every block is unique and as a business does not rely on average prices. So much can be picked up on a site visit by one of the BCH’s team of surveyors who between them cover the whole of the UK.
RICS in its Guidance Note 2018 advises its surveyors that:
“It is prudent to incorporate recommendations within the report to the effect that the client needs to reassess the sum insured on a regular basis, with an annual adjustment to reflect inflationary effects, and a major review and reassessment every three years, or earlier should significant alterations be made to the insured property.”
BCH strives to follow the guidance for best practice in both the way it undertakes its RCAs and in setting up systems with its Property Management customers to maintain the relevance of the assessments for years, through a planned review programme.
If you have any further queries regarding maintaining a compliant RCA, or would like to discuss our services further, please get in touch today on 01455 293 510 or email us at [email protected].
