What is building insurance?
Building Insurance covers certain damage that occurs to your home, property or business.
It is important to understand that Insurance will not cover maintenance related losses or damage due to wear and tear. The owner of a premises will take out Building Insurance against risks such as fire, storm and property vandalism. Building Insurance usually extends to cover the fixtures and fittings, outbuildings, garages, swimming pools, driveways, patios, walls, terraces, gates and fences, built-in-cupboards and the like, but policies vary and you must ensure that all your buildings are adequately insured.
If you are simply hiring or renting a premises it is important to determine whether the lease or hiring agreement clearly states who is responsible for the building insurance and/or the extent of your responsibility for damage to the building.
When insuring property it is important to ascertain the most current rates for rebuilding and that the building is insured for the total cost of rebuilding. Under- insurance will result in ‘Average’ which determines that a proportion of the ‘risk’ has been taken on by the owner of the property. This means that when a ‘claim’ is submitted only a rateable amount will be paid out. It is also important to check that the sum being insured for includes any additional expenses that could be incurred for example: Fire Department, Removal of Rubble, Architect Fees or Municipal charges. It is therefore worth enlisting with professional valuators who can accurately evaluate the property thus preventing being under-insured for your Building insurance policy.
Shedding some light on Building Insurance Coverage
- The insured sum included in a building insurance policy must be the total cost to replace the building including all improvements to the property and all professional and other costs (VAT inclusive).
- The market value has no direct relationship to the cost of re-building, it is up to the owner to obtain the correct sum insured.
- A successful method of obtaining an accurate assessment of the replacement cost of a property/building is to hire the services of a professional, reputable and registered Quantity Surveyor.
- Once this assessment has been obtained, the onus lies with the owner to keep this assessment up to date.
- Adequate and regular maintainable is crucial.
Building Insurance Claims:
There are risks and consequences in the event of a building insurance claim being submitted and can be classified as follows:
- If the Valuation or assessment is too high it is referred to as – Over-insurance – This will result in the insurer honouring the claim excluding the amount in excess. Over-insurance indicates that the premium is too high for the same benefit in relation to being insured at correct replacement cost.
- Correct assessment or – Insurance at replacement value – Here the claim will be honoured per the quantum claimed as the property is insured for the correct replacement value with the correct premium being levied.
- Valuation too low – Under-insurance – This is most onerous as only a portion of the claim will be honoured by the Insurer. The percentage of under-insurance will be applied to the claim and the balance with be for the Insured’s account. This could result in the owner being unable to restore the property to the condition intended for before.