With the large number of recent claims in Australia this year as a result of bush fires, hail storms, flooding and other weather events, and with discussion about building sums insured and underinsurance, the spotlight is definitely on the high level of under (and non) insurance.
Often people will try and increase their sums insured when an event is about to hit so clearly people know they are underinsured and will often get frustrated when insurers put embargos in place.
Underinsurance and Building Sums Insured
The building costs in Australia have increased over the last 2-3 years and we frequently see extra costs involved of bringing older homes or buildings up to the current building codes when repairs are undertaken. This cost can be substantial especially for bushfire, flood or cyclone events.
There’s also demand surge to take into account. This is when the extent of damage such as flooding or some other kind of natural disaster pushes up the cost of materials and labour, in line with the high demand. The pandemic supply issues have further contributed to demand.
When looking at setting your Sum Insured, it’s a good idea not to rely on a bank valuation for a commercial building but to pay an expert for a valuation for insurance purposes. A valuation for insurance purposes should give you a much better idea of replacement value of the building and not just what the sale price might be if the bank needs to sell it during a distressed sale.
Building Valuation for Insurance Purposes
Getting insurance valuations right is not easy and takes great attention to detail and a clear understanding of how property insurance works. If you haven’t had your commercial property valued for insurance purposes in recent years, it will probably be a worthwhile exercise given the pressure within the building industry at present. Adjusting your insurance before an event is much better than finding out you’re underinsured after an event happens. You can read more on underinsurance and check out the online insurance calculators here.
To have the best chance of avoiding underinsurance and issues with your buiding sums insured, take the time to review your insurance properly when it comes due (or review it now) and have a realistic understanding of the true replacement value of your asset.
If you’d like to discuss your building sums insured with a qualified professional insurance broker, give our office a call or contact us here.