What declared value do you actually need?

Over my eighteen years in the insurance industry, I have had the pleasure of working with many companies that are third or fourth generation family-owned businesses. They will often show me photos of when the company was established, with the building that we are sitting in dating from the turn of the 20^th century, complete with a canal-facing loading bay or horse and carriages!

A lot has changed in that period and the recent underinsurance issue sweeping across the insurance industry is just the latest challenge these companies are facing. But it can be far more complex than just looking for an updated rebuilding valuation.

The question that insurance brokers should be asking their clients in this instance is, “Would you reinstate the building(s) exactly as it stands today?”. The answer in respect of businesses like the ones I’ve described above could be “No, we would change the site around and the sheds towards the canal have been unused for years”.

If this is the case, why would you look at setting a building declared value to put back what you currently have? Many brokers will put a tick in the box recommending a reinstatement valuation, but what would be more beneficial is a discussion between the insured, their broker and insurers (plus possible pre-nominated loss adjustor) about breaking the site down and establishing a first loss limit which at worst allows for complete site redevelopment or, for a less substantial claim, repairs or reinstatement/development of the damaged areas.

Establishing the above is far from straightforward and requires careful thought and a good broker working in partnership with you and your insurer(s). But given the cost of a modern steel-clad industrial building against a redbrick one, it could result in premium savings by having a lower buildings sum insured that will accumulate at each renewal, in fact it would be extrapolated in the current hard market.

Another example of where a broker could add value in a similar situation is for a property developer.  They could acquire a site and look to make planning applications to redevelop it. Again, if the broker knows this and just simply arranges insurance to reinstate what they already have in place, they are not providing their client with the best option and the client’s premiums will be higher. If the plan is to demolish the site to redevelop, then removing the debris removal cover (steps should still be taken to set a correct debris removal figure via a professional) will normally result in a premium saving.

Not many brokers think the way we do about the clients they insure, but one size does definitely not fit all.

If you have a situation similar to those outlined above in your business, please call us on 020 7543 2807, as there could be premium savings out there… which in a hard insurance market will always be welcomed.