Tips to avoid underinsurance on farm buildings

Underinsurance is a frequent problem in buildings claims, and means claims are scaled back in proportion to the degree of underinsurance.  

For example, if a property costs £500,000 to reinstate but is insured for only £400,000, it is 20% underinsured.

So, on a claim for full reinstatement, the insurer would pay out only 80% of the sum insured, which means the policyholder would receive a maximum of £320,000.

Robert Franklin, head of architecture and building surveying at Robinson & Hall, says too many farmers rely on figures which are clearly out of date. 

If the property is let, the losses may be added to by loss of rent, as any claims for this will be reduced by the same margin.

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“It’s also important to consider the impact of any delay in resolving the claim, which will potentially affect occupancy and in some cases rental income,” says Mr Franklin.

Importance of accurate reinstatement costs

An assessment of reinstatement cost should cover a complete rebuild, including all materials and labour, he advises.

The demolition cost of clearing the site, professional fees and any other exceptional features should also be accounted for.

“A full reinstatement cost assessment should be carried out every three to five years, or whenever appropriate, such as after an extension, refurbishment or in some instances, a change of use.”

Listed buildings or historic property are likely to call for specialist materials and building techniques to restore to their original condition.

Some properties may contain asbestos – removing and replacing this can add significant cost to a rebuild.

Option to use own surveyor

“For any significant claim following a fire, flood or structural damage, the insurance company will appoint a loss adjuster and their own surveyors to investigate the details of the damage and manage the claims process,” says Mr Franklin.

“However, many people do not realise that they can employ their own surveyor to manage the reinstatement works on their behalf. These costs, along with all other reasonable expenses, are included under their claim.

“Assuming you are adequately insured, it will not cost you a penny to get impartial, qualified, quality advice and management for the duration of the insurance reinstatement works.”

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