80% of commercial buildings are under insured

When it comes to let property insurance for landlords, the devil is in the details. By taking time to carefully consider your needs, however, you can ensure that your landlords insurance does what it’s supposed to: Be your guardian angel.

Under insurance is a common problem in the UK commercial property market, with many landlords simply having no idea of the level of insurance cover they require. The British Insurance Brokers Association issues regular warnings about under insurance, yet few landlords appear to be heeding its advice.

Alistair Steward, risk solutions director at Cunningham Lindsey, which offers a calculation service for British Insurers Brokers’ Association members, says:  “Underinsurance applies to over 80% of the properties we value, with an average amount of underinsurance on commercial buildings around £150,000.”

Property priceshave fallen and if the surveys by the Halifax and the Nationwide are anything to go by, house prices will end this year between 15% and 20% lower than they started – easily the biggest annual slump on record.  With about £30,000 knocked off the selling price of the average house in the past year, why are landlords finding themselves under insured? Well; although property prices have and continued to fall, repair and renovation costs have continued to rise.

The hidden costs of rebuilding covered by landlords insurance

• Clearing the site
• Surveyor costs
• Architect costs
• The cost of building the property to its original state
• Complying with government and local authority requirements

Remember insurers will only pay as much as the building is insured for, so failure to insure for a sufficient amount could result in expensive costs if a claim should arise

Calculating the rebuild cost of a property

The cost of rebuilding the property will not be the same as the market value. Surveyors and insurers have some rules of thumb to help you work out what your property is actually worth, to be absolutely sure you should get a surveyor’s report.

If you are buying a property to let, the lender’s valuation report will also contain a rebuilding cost figure.

Broadly speaking to work out your rebuilding cost, you should know the building dimensions which can be calculated by multiplying the length and width of the property in feet by the number of storeys.

How to calculate rebuild costs

A. Calculate the ground floor area. (ground floor area = Length x Width)

B. Calculate the total floor area. (total floor area = Ground floor area x Number of storeys)

C. Calculate the total rebuilding cost. (Total rebuilding cost = Total floor area x Rebuilding cost per square foot)

The cost per square foot will vary depending on where in the U.K. you live.

You can calculate your re-build cost online, visit the ABI (Association of British Insurers) website by clicking here