Business Clinic: The risks of leaving disused farm buildings uninsured

Whether you have a legal, tax, insurance, management or land issue, Farmers Weekly’s experts can help. Farmers Weekly Business Clinic expert Steve Gray, commercial property underwriter at NFU Mutual, explains the risks of leaving redundant farm buildings uninsured. 

A disused farm building might not seem worth insuring. But there are a number of considerations to be taken into account before dismissing taking out a policy.
 
What happens to such a building if it is damaged or destroyed, perhaps by fire? Asbestos cleaning up costs, the loss of a potentially valuable future business asset and a hefty bill for restoring listed elements are just some of the issues to think about.

Q: Do I need to insure redundant farm buildings – my insurer says I could get a big bill for ‘clean up’ if it burns down?

A: Farmers can be hit by a big bill for environmental clean-up costs if an uninsured building with asbestos sheeting or similar potentially hazardous materials burns down.

However, that is only one factor to consider when arranging insurance cover for redundant buildings, tempting as it might seem to remove them from your policy.

All structurally sound buildings should be viewed as valuable business assets that need insurance protection. While a building may sit empty for months, it can suddenly be back in use due to changing circumstances or new business opportunities at very short notice.

Steve Gray
Commercial property underwriter, NFU Mutual

If you have deleted the building from your insurance policy after an annual review, it can easily be forgotten and if a fire destroyed it, you could be left out of pocket.

All buildings covered on your insurance schedule should include cover for debris removal costs, although it is important to ensure the declared rebuilding value is always adequate to avoid a settlement being reduced in the event of a claim.

Some policies also pay specifically for asbestos removal following insured damage, in addition to the sum insured, up to a limit shown on your schedule. However, this cover extension might only apply to buildings that are actually insured.

One option might be to insure on a “first-loss” basis. This means if a serviceable, but old, building is destroyed, it could be rebuilt at less cost in modern materials rather than the old materials with which it was constructed.

This basis often costs less than standard cover and would at least retain the building on the schedule – with the asbestos removal extension still applying.

However, if buildings are listed, they should be insured for a sum that will cover rebuilding in traditional materials.

Specialist – and therefore expensive – construction techniques are usually required for repairs to listed buildings. And the status means leaving a damaged building in a ruined state, or demolishing it, is rarely an option.

It is particularly important with listed buildings that the rebuilding value is professionally assessed, rather than the usual approach of simply applying a rate per square metre.

As no two farms are alike, it is important to regularly reassess the insurance basis and sums insured on buildings with your insurer.

The annual insurance review provides a good opportunity to go over the cover in place and make sure it accurately reflects current activities on the farm and provides sufficient protection without paying unnecessary premiums.

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