Calculating proper block of flats insurance is complicated. It is tempting to go with the lowest amount of cover as possible, but this will lead to a potential disaster for any landlord. The value of the rebuild of a property can cause irreplaceable losses.
The following valuation areas need to be considered:
- The cost of current reconstructing prices in the area.
- The cost of clearing and preparing for construction.
- Fees and expenses associated with the process.
All of this should be a major factor in a block of flats insurance policy – specifically buildings insurance.
From this basic information, there are other items that will factor into choosing the proper cover amount. These factors include:
- Inflation costs that can arise due to rebuild times.
- Alternative accommodation cover that is needed to provide accommodation for tenants.
- Claims of liability, and claims from adjoining building owners.
- Long-term rental and contract losses.
- Staff compensation.
These points need to be factored into the proper cover amount. Rebuilding can take years for a bigger property, and inflation can rise 1 to 3 times in some cases. If a policy is older and new cover amounts are not routinely considered, there may not be enough cover to rebuild.
Liability claims and claims from adjoining building owners or the public will lead to a massive lawsuit in most cases. Legal expenses at this time can swell, causing many landlords to have to sell their property to pay off claims. Insurance may provide cover for legal expenses, which would help to lower these burdens.
Arriving at the proper valuation of a property will require the help of a Chartered Surveyor. This will give the best possible estimate on a building’s real valuation.
Determining the size of the building and the quality of the construction will be needed. The judgment of the valuation will also need to consider adjoining building costs, which can increase a property’s value.
Valuations should be updated yearly. A full re-inspection is recommended every 3 years in most cases. There are also times when a landlord will over-insure a block of flats, causing unnecessary expenditures to arise. Knowing the right cover amount to seek may mean saving more money on premiums, or it can mean paying higher premium amounts because the building’s value is higher.
Exclusions and the scope of liability should always be understood for any potential policy. Exclusions may cause a sense of false hope in that a policy provides enough cover, yet doesn’t truly offer the cover when it is needed most.
Knowing your responsibility of what to cover and the appropriate level of cover that is needed is a necessity. It is recommended that, as a landlord, you make a strict policy that needs to be followed to assess your cover needs. That is, a policy that will be used any time a new insurance policy is needed, or an update on the cover amount is recommended.
Professional advice from a surveyor or assessor is recommended. This will help you avoid potential holes in insurance that may end up costing you money – or major losses.