How solid is your property insurance?
There is nothing like a natural disaster to test the worth, substance and reach of your property insurance. The perfect coverage for an orange means nothing is in it for you, if you are an apple. There is no such thing as ordinary business, and as such, you should never settle for ordinary insurance, and yet too many businesses settle for a ‘one size fits all’ insurance policy that in the end fits no one.
As the nature, profile and risk of business change, your company will need to respond with insurance coverage relevant to your business. The last thing you want should your business suffer the misfortune of loss is a delay in getting back on track.
The Cadillac of property coverage is the ALL RISKS POLICY. A typical all risks policy protects the business or residence as outlined in Chart 1
In addition, most all risks policies cover:
• Alternative accommodation
• Loss of maintenance fees
The dirty little secret of property coverage:
You have heard many stories of rude awakening with policies not covering as much as one thought it would, which brings us to the ‘Pro Rata Condition of Average Clause (aka Underinsurance Clause’ or average clause).
This means – If at the time of any loss or damage the sum insured is less than 85 per cent of the full replacement value of the property insured in the case of your residence or 100 in the case of your business:
• The company will be responsible for the difference between the sum insured and the full replacement value of the property insured, and shall bear a rateable proportion of the loss or damage accordingly.
• Each and every item of the policy shall be separately subject to this condition.
Your broker has the technical know-how to reduce the 100 per cent requirement by insurers for commercial insurance to 85 per cent at a minimal cost.
(Please see Chart 2)
The valuation report and its impact on the average clause
A valuation from the list of valuators approved by most banks is your primary guarantee you will not be in for a rude awakening when you make a claim on your property insurance. It is always a good idea to do a property valuation before you buy property insurance and to update your valuation at a minimum every two years.
(Please see Chart 3)
Making a claim – how to get paid quickly:
Should a broker come between you and your insurance company? Yes – especially if you have a claim. Most property claims can be settled within 45 days if you act quickly and listen to the professional advice of your broker.
(Please see Chart 4)
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