Helping A Commercial Property Owner Correct A Serious Underinsurance Risk
Getting the building sum insured right is one of the most important parts of commercial property insurance. In this case study, we explain how we helped the owner of a Grade II listed mixed-use property identify a significant shortfall in their existing buildings cover and arrange insurance based on a more appropriate rebuilding value.
The property included a ground-floor shop with a residential flat above, making it especially important that the building was insured on the correct basis.
Project Overview
The client owned a Grade II listed commercial property with a shop on the ground floor and a residential flat above.
The property had previously been insured with a building sum insured of £450,000 and an annual premium of £601.
When we reviewed the existing arrangements, the £450,000 rebuilding figure immediately appeared low compared with similar properties of a comparable age and size that we had previously insured.
Rather than simply arranging cover using the existing figure, we explained to the client that we were not comfortable taking on the insurance without first establishing a more reliable rebuild value.
The Challenge
The client's existing insurance arrangements included:
- A Grade II listed mixed-use property.
- A ground-floor commercial shop.
- A residential flat above.
- A building sum insured of £450,000.
- An annual premium of £601.
- No specialist rebuilding assessment confirming whether £450,000 was sufficient.
Based on our experience with similar properties, we believed there was a real risk that the building was significantly underinsured.
The concern was not simply about paying the correct premium. If a serious claim occurred and the rebuilding figure was substantially below the true cost of reinstatement, the client could face a significant financial shortfall.
Get in TouchOur Solution
We discussed the potential consequences of underinsurance with the client and explained why the existing £450,000 building sum insured needed to be checked.
Although our experience suggested the figure should be considerably higher, we were clear that we were not qualified to calculate the rebuilding cost ourselves.
Instead, we recommended a specialist company we use that provides desktop rebuilding assessments.
The client agreed and asked us to arrange the survey.
The assessment cost £195 and was returned approximately one week later.
The recommended rebuilding figure was:
£833,292
This meant the existing £450,000 sum insured represented only around 54% of the assessed rebuilding value.
Using the updated figure, we then carried out a market search through our panel of property insurers and arranged new cover for an annual premium of £813.
The new policy also included:
- Buildings cover based on the £833,292 rebuilding assessment.
- Accidental Damage cover.
- Loss of Rent cover for up to 36 months.
- Cover arranged after a wider review of the property's requirements.
Before And After
Before
- Grade II listed mixed-use commercial property.
- Ground-floor shop with residential flat above.
- Building sum insured of £450,000.
- Annual premium of £601.
- No specialist rebuilding assessment.
- Significant potential exposure to underinsurance.
After
- Specialist desktop rebuilding assessment completed.
- Rebuilding figure established at £833,292.
- Buildings insurance arranged using the updated value.
- Annual premium of £813.
- Accidental Damage cover included.
- Loss of Rent cover for up to 36 months included.
- Greater confidence that the property is insured on a more appropriate basis.
The Outcome
The client now has commercial property insurance based on a specialist rebuilding assessment rather than relying on an existing figure that appeared significantly too low.
The annual premium increased by £212, from £601 to £813, but the building sum insured increased from £450,000 to £833,292.
The new policy also included Accidental Damage and Loss of Rent cover for up to 36 months.
For the client, the priority was not simply keeping the premium as low as possible. It was having confidence that the property was insured on a basis that better reflected the potential cost of rebuilding it.
Read Our ReviewsWhy This Case Matters
This case highlights the importance of checking whether a building sum insured remains appropriate rather than automatically carrying the same figure forward from one renewal to the next.
The previous £450,000 figure represented only around 54% of the rebuilding value identified by the specialist assessment.
Where a property is underinsured, this can have serious consequences if a claim occurs. Depending on the policy wording, underinsurance may affect both major and partial claims.
The case also shows the value of using an insurance broker who is prepared to question the information already on a policy.
Rather than accepting the existing sum insured, we identified a potential issue, explained the risk to the client and recommended obtaining specialist advice from someone qualified to assess rebuilding costs.
That allowed the client to make an informed decision and arrange cover using a more appropriate rebuilding figure.
Speak To Our Team TodayWho We Support Across Yorkshire
From our office in Bedale, we provide insurance advice to property owners throughout Yorkshire, including:
We work with a wide range of clients, including:
- Commercial property owners
- Residential landlords
- Owners of mixed-use properties
- Property investors and developers
- Business owners and shopkeepers
- Owners of unoccupied properties
Whether you own one property or manage a wider portfolio, we take the time to understand the building and your circumstances before discussing suitable insurance options.
Why Choose Scanlan Insurance Brokers?
Family-Owned Since 1993
We are a family-owned insurance brokerage with roots dating back to 1993.
60+ Years' Combined Experience
Mike and Dave Scanlan have more than 60 years of combined experience within the insurance industry.
FCA Regulated
We are authorised and regulated by the Financial Conduct Authority.
BIBA Members
We are members of the British Insurance Brokers' Association.
350+ Insurance Providers
We have access to more than 350 insurance providers, helping us explore suitable options based on each client's individual circumstances.
Flexible Appointments
You can speak with us by phone, email or video call, or arrange to meet us in person.
Personal Advice
We focus on helping clients understand their cover, identify potential gaps and make informed decisions about their insurance.
Speak To A Local Insurance Broker
If you own a commercial or mixed-use property and are unsure whether your building sum insured still reflects the potential rebuilding cost, we can help you review your existing arrangements and discuss the next steps.
Call: 01677 988033
Email: [email protected]