© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
Is your block of flats underinsured? What are the indicators of possible under-insurance and, if under-insured, what are the consequences?
1. THE SUM INSURED IS BASED ON THE MARKET VALUE
The market value is the MARKET value not the sum insured for insurance purposes, which should include the full cost of rebuilding to the same specification as existing in accordance with current regulations and allowing for demolitions and fees. The market value and the rebuild cost are often significantly different and either one can be far higher or lower than the other depending on the location and quality of the building.
2. THE DEVELOPMENT IS IN A DIFFICULT LOCATION
For example, is the development located in a confined city or town centre with difficult access or working space for contractors? Imagine how this could impact on the rebuild cost.
3. OLDER AND LISTED DEVELOPMENTS
Buildings from the past were built to last and often have thicker walls and higher quality materials. Higher quality means higher costs, so older and Listed buildings are more likely to be underinsured.
4. THE DEVELOPMENT IS OF HIGH QUALITY INTERNALLY
High quality kitchens, bathrooms, floor, wall and ceiling finishes and other fittings can also add significantly to the rebuild cost and should be fully reflected in the sum insured.
5. THE DEVELOPMENT HAS OTHER FEATURES
Property owners often neglect to consider the reinstatement cost of blocks of garages, car parking, drives, roads, footpaths, boundary walls and fences, external drainage, lighting and the like; all of which are usually included within the definition of ‘buildings’ within flats insurance policies.
6. THE DEVELOPMENT HAS RECENTLY BEEN EXTENDED, ALTERED OR REFURBISHED
If so, was the sum insured altered to account for the added value of those changes?
7. THE VALUATION WAS PROVIDED BY THE ORIGINAL DEVELOPER?
For modern developments, the insurable amount is sometimes provided by the original developer. Often however, developers are able to build to a fairly standard design utilising their own team of consultants and contractors. Costs are kept to a minimum and, in all likelihood, the savings achieved by the developer will not be available in an insurance claims scenario. There are also the additional costs of demolitions and fees to take into consideration. It is often found that developer’s figures should be treated with caution.
8. THE DEVELOPMENT HAS NEVER HAD A PROPER VALUATION.
Even if a building is believed to be insured on the correct basis, where did the figure come from, when was it last revised and was everything taken into account including VAT? If based on guess work or rule of thumb, the chances are it’s wrong and should be checked.
Although there is the potential for directors of Residential Management Companies and Managing Agents to be sued for failing to arrange a proper insurance valuation and failing to arrange adequate insurance cover, this is usually of little comfort in the immediate aftermath of a major fire.