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The implications of being underinsured

Club Insure cannot emphasise enough the importance of our clients setting their clubs sums insured correctly. If you currently choose not to insure your buildings at the correct reinstatement value, your insurers will apply average in the event of a claim; subsequently any settlement will be reduced in proportion to the amount of the underinsurance. This applies to ALL claims and not merely total losses.

Club Insure recommend that all our client’s arrange a comprehensive building valuation at least every 5 years. Club Insure cannot advise on what to set your sums insured at as we are not qualified Chartered Surveyors. The sum insured that you declare to insurers should represent the cost to reinstate your club i.e. to rebuild it, not just the market value.

Other considerations:

Debris removal – identification of asbestos in a building can significantly increase the cost of debris removal at the time of a claim.

Demolition and professional fees – think about clearing the damaged club and the professional fees associated with re-building, it’s not just the cost of a new club.

Understand building regulations and legislation – additional features i.e. lifts and disabled access may have to be installed during reinstatement, even if they were not there prior to the loss.

Identify listed status – This can have huge ramifications on the cost of reinstatement due to the requirement to source original materials.

Include everything – internal features, outbuildings, car parks, boundary walls; the list is not exhaustive.

Maintenance of an inventory – or an asset register, helps identify the quantity and value of plant, machinery and equipment stored on your premises.

Is the equipment obsolete? – If an item is difficult to replace, the cost of its replacement may well be higher than you expect.

Club Insure work in close partnership with a chartered surveyor who can undertake a valuation of your premises at a very competitive rate – for further information call 0844 488 9204.

Examples of underinsurance found following valuations by our nominated chartered surveyor at various social/working men’s/sports clubs around the country:

Club X Sum Insured £750,000 Valuation £1,875,000
Club Y Sum Insured £720,000 Valuation £1,370,000
Club Z Sum Insured £600,000 Valuation £1,100,000

If for example the following Clubs had a claim, the following formula would be applied:

Club X suffers a Theft Loss – £10,000

Payment received would be calculated as follows:

£750,000/ £1,875,000

= £4,000 – policy excess of £250 = £3,750 paid by insurers.

The club need to find £6,250 from their own funds to pay for the underinsured element of the claim.

Club Y has a relatively serious fire:

£720,000/ £1,370,000

= £157,664.23 – policy excess of £250 = £157,414.23 paid by insurers.

The club now has the find the remaining £142,585.77 from their own funds to pay for the underinsured.

By | 2016-12-01T15:03:14+00:00 July 1st, 2014|Articles|0 Comments

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