What Sum Insured should I have for my commercial property? It’s such an important question and could be one of the most important decisions you’ll make.
Setting an accurate sum insured for your insurance of your commercial property is crucial and you need to get right if you are to be protected should your building be damaged or destroyed.
Catastrophes and major events happen all the time, and particularly in Australia we see the devastating consequences of major flooding and fires which result in major losses for home and business owners. Insurance has a major role to play in assisting people and businesses get back to some form of normality as quickly as possible. However, it is important to note that your insurance can only assist if your policy and the sums insured are adequate.
The media has highlighted the issues around building cost blowouts, labour, material shortages and inflation. It is not difficult to understand why Commercial Property Owners can be underinsured.
Don’t get caught out!
Underinsurance is a huge problem in Australia and not having enough insurance could be disastrous in your time of need. The issue is not only at claim time should your building be a total loss. If you are underinsured, some policies have clauses within the contract which will consider the underinsurance a breach of your declaration. This could mean that your settlement will be reduced, and you will be left out of pocket.
So what is a Sum Insured and what does it mean?
It is the insurance replacement value of your building (how much it would cost to re-build from scratch) and needs to include some allowances for variables and additional costs such as;
- Removal of debris (Demolition of existing buildings/structures, clearing of the site following a loss);
- Escalation or increased costs following a catastrophe.
- Professional consultant fees including but not limited to architects and surveyors.
An important additional consideration to all of this is time. You need to consider the amount of time it will take to rebuild your property and get it back to the point where you can use it. When you consider that, following a large loss the initial and ongoing assessment of damage, planning and tender periods and the final construction period, as well as time spent ensuring local government & council building codes are met, it is not difficult to see rebuilds extending beyond 12 months! This also needs to take into account the delays in getting a rebuild started. Any possible increase in costs over a rebuild period need to be considered. It has been well documented that costs have varied (increased) considerably over the past year or so and it is easy to be caught out.
The good news is that some policies have additional benefits (additional to the sum insured) to assist you with these costs. We can guide you through these.
Your insurance sum insured should not necessarily be the purchase price or current market value of the property location. They do not relate to the replacement cost of your building and could leave you underinsured (or over insured) and severely impact you in the event of a loss.
Who can help you get the correct Sum Insured?
Again, professional advice is important. The services of a qualified professional Quantity Surveyor to determine the accurate sum insured value of your building may be a wise investment.
The time to talk to one of our Qualified Professional Insurance Brokers is now. Increasing your sum insured before it is too late is preferable to finding out you have an issue at claim time. We can guide you and refer you to Quantity Surveyors as well as providing quality insurance advice on the risk management of your commercial property.
To chat to us about the Sums Insured for your Commercial Property and to make sure you have the right insurance cover in place, contact us here. We’re here to help protect what’s important to you.