20 March 2017
Property owners could be putting themselves at risk by not insuring their properties to the full reinstatement value, leading to settlement issues when it comes to claims payments.
- VAT – the question of VAT arises on the settlement of a claim, and who can recover the VAT element in the process. With VAT now standing at 20% it is vital that the sum insured is adequate in this aspect. The sum insured should therefore include the VAT unless there is a means of recovery should a claim occur. This has become more pronounced recently with many business owners moving their property from their company into a pension fund, at which point the VAT should be included in the reinstatement sum insured. Ask yourself who owns the building; can they recover VAT; is the building listed?
- Definition of building – each insurer will have a slight variation, but this could be the building including foundations; landlords fixture and fittings; satellite dishes; fixed glass; tenants improvements formerly the property of a tenant but relinquished at the surrender of a lease; furnishing and common parts; management and security system; walls, gates and fences; services; fuel tanks and pipe works; car parks, pavements and surfaced areas; landscaping including trees; and street furniture. The list is extensive, and it is vital that the sum insured takes account of these, as well as the cost of infrastructure such as IT systems. Many of the items above can make up 30% of a sum insured.
- Lease agreements – the lease is key to setting out what should be insured and by whom. Is it the landlord or tenants responsibility? The lease may state that the obligation is for the landlord to insure the premises other than tenants fixture and fittings, however the property owner has to accept responsibility for insuring the tenants improvements to the buildings. The larger the property and the more sophisticated the improvements would therefore present itself as underinsurance.
Discuss your warranties and conditions, your VAT position, and who is responsible for the building with your insurance broker, so that you have the correct valuation should you need to make a claim.
MacKay Corporate can now offer an online valuation service to property clients which will provide an up-to-date reinstatement sum insured on a property and also an estimate of the rebuild period. This will provide an accurate benchmark to insure the property and also the period the client should insure loss of rent / business interruption.
If you would like more information please contact MacKay Corporate on 01292 611 028 or email email@example.com.