Getting the sum insured right is essential for Residents’ Management Companies (RMC).
What will the winter of 2009/10 bring? We can all remember floods, storms, tornados and some notable fires which brought insurance to the forefront of our minds. The adequacy of Insurance cover can, however, depend on the accuracy of the valuation placed on the buildings.
In general, it is not the claim caused by a leaking basin in the flat above nor graffiti sprayed on the block of garages which will cause the RMC an insurance problem, as for such relatively minor claims under insurance will often go undetected. However, the adequacy of the sum insured will be scrutinized following a major incident, such as a fire starting in the centre of a block which spreads upwards and downwards, with other areas of the building lying water logged as a consequence of extinguishment. If the cost of repairs were to exceed the building sum insured, what then?
If the sum insured is wholly inadequate or exhausted by the loss, the residents may then turn their attention to the RMC. It is after all, the RMC that represents the residents and which is ultimately responsible for the insurance policy. It is therefore good practice to obtain professional advice on sums insured for insurance purposes at least every 5 years.
Roger Corp, Director of Barrett Corp & Harrington Ltd (BCH), an approved supplier of insurance valuations, has both a quantity surveying and loss adjusting background and much experience in dealing with major incidents, particularly floods and fires. Roger says‘The unexpected disaster need not be exacerbated by underinsurance. All too often the ongoing impact of underinsurance will last far longer than the initial shock of seeing the asset razed to the ground. Setting the correct sum insured will avoid this misery.”
Insurance reinstatement values rarely bear any resemblance to market values. With such wide ranging cover available, it is essential that all elements that make up‘buildings’, as defined in the policy, are allowed for and included in the valuation. These include dwellings, garages, day rooms, common parts and lifts. The insurance policy may also allow for external items such as car parks, lamp standards, hedges, walls and fences. Allowance also needs to be included for increases in cost related to compliance with current building legislation. In addition, policies should be index linked to protect against inflation. All of this responsibility sits with the RMC. So how can the RMC fulfil its obligations?
BCH offer discounted rates for Rebuilding Cost valuations to Flat Living customers on a national basis. In most cases, fees are based upon the existing sum insured not the revised sum and agreed and fixed in advance. For a relatively modest fee, peace of mind can be obtained so that, in the unlikely event that disaster strikes, the RMC can focus efforts on rebuilding, not trying to raise funds to finance the underinsurance short fall.
