Insurance Valuations for Business Assets
Your business assets are likely to be insured on a reinstatement as new basis that entitles you to replace your business assets with new ones in the event of a loss. To benefit from this ‘new-for-old’ insurance scheme, Insurers require that you correctly declare the value of your assets at their current new cost.
The downside to insuring on this reinstatement as new basis is that unless you correctly declare the value of your assets, you may become vulnerable to underinsurance. Should the value you declare be less than the actual cost of reinstatement then the Insurers will assume that you are self-insuring the difference.
For example, if you declare the ‘new-for-old’ value of your assets at £5million when the actual cost of reinstating it with new machinery is £10million, then Insurers will then be able to apply a 50% ‘average’ to the claim. Thus, Insurers would only meet a claim for £3million with up to £1.5million. Responsibility to find the balance will rest on you.
Underinsurance could therefore be fatal for your business. Should you be in any doubt over your insurance cover, we urge you to undertake professional business insurance valuations. Having considered a multi-million-pound claim relating to a flood, recent advice in the printing trade press made clear that you should “Update your asset register – Make sure you have up-to-date kit valuations”.
A fire in 2015 at a local Farnham business Bourne Mill is a prime example of underinsurance. They originally stated they would reopen within six weeks. However, the owner remains in a protracted dispute with the insurer nearly two years later:
There is also the risk that you may have overvalued your business assets. You may be paying over the odds for your insurance cover. Can you afford to be paying more than you need for insuring your business assets?
Marriott & Co.’s RICS registered Valuers are experts in the insurance valuations of business assets and will ensure that you pay the correct amounts for your business assets insurance cover.
We will consider such matters as:
- The collation of an independent and professional inventory/asset register
- the current new cost of each major asset including those assets that you may have bought second hand and are insuring at their second-hand price rather than at their current new cost
- cost of delivery, installation and commissioning
- the cost of machine foundations
- the cost of factory services such as three-phase electricity supplies, high-pressure air systems
- debris removal cost
- the cost of complying with current machinery regulations
- produce a professional report prepared by qualified Valuers that discloses correct sums insured and demonstrates good governance to your Insurers.
You go to great effort and expense to effect insurances. So, don’t become vulnerable to the underinsurance or over-insurance pitfalls. If you are concerned about your business assets insurance cover, contact us for a free consultation. Call us on 01252 712 083 or send us a message.