News

Worcestershire commercial property consultancy GJS Dillon is warning local business owners and commercial property landlords about the dangers of underinsuring their buildings in the event of a major loss.

Eighty per cent of commercial buildings are underinsured, according to GJS Dillon Director Jonathan Mountford.

“Most businesses would not survive a loss of their premises, as they are not properly covered. The latest research shows that up to four fifths of commercial properties are up to 60% underinsured,” says Mr Mountford. “This means that the insurance company would only pay out 40% of the building costs in the event of a total loss of the premises.”

According to Mr Mountford, the insurance value of commercial properties, and of older or listed residential properties, is far more difficult to assess than a straight forward residential property, and owners often make the common mistake of thinking that the rebuild cost is the same as the freehold value.

He says: “The rebuild cost has no bearing on the freehold value at all, so to get a correct figure, owners require a full ‘Assessment of Building Reinstatement Costs for Insurance Purposes’, carried out by a Chartered Surveyor.

“If the property is underinsured when a claim is made, the insurance company can invoke the average clause and only pay out a proportion of the full rebuild cost, leaving the owner to pay the rest. This not only leaves the freeholder with the trauma of dealing with a substantial loss, but also the burden of funding part of the rebuild cost.

“It’s highly unlikely that most businesses could survive this,” states Mr Mountford, “so it is best to be properly insured in the first place.”

GJS Dillon provides a range of valuation services for commercial and residential properties, including Assessments of Building Reinstatement Costs for Insurance Purposes. For further information, please contact Jonathan Mountford on either tel. 01527 872525 or tel. 01905 28684 or by email: jonathanmountford@gjsdillon.co.uk.

With offices in Droitwich, Worcester and Bromsgrove, GJS Dillon is a firm of Chartered Surveyors which offers a comprehensive commercial property service, and unrivalled geographical coverage, throughout Worcestershire and along the M5 and A38 corridors.