February 15

Material Damage Insurance

Insurance News

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It would be easy to list all the items here showing what this policy or section of cover protects you for but it’s probably easier to say it protects your physical assets. It could also be classed as property damage and protects you from the set perils that the policy provides. Normally these are fire, flood, theft and malicious damage along with other losses you may suffer.

The purpose of the cover is to reinstate the asset following its loss or damage. This could be by replacing or repairing the damage if economical or by way of a financial settlement.

The basic cover provided by most policies is Fire, Lightening, Aircraft and Explosion but, dependent on the asset, the majority can be extended to cover Theft or attempted theft (normally restricted to be by means of violent or forcible entry or exit), Storm, Flood, Escape of water, Riot and civil commotion, Impact by third party vehicle, Sprinkler leakage, Subsidence, Subterranean fire, Malicious damage

What is typically not covered?

Terrorism – this is normally covered by a separate terrorism policy

Wear and Tear

Electronic data

Building defects

Pollution

War

Do I need to buy this cover?

Insuring your asset is not a compulsory requirement but contractually you may need to. This may be a condition with a mortgage provider or customer or supplier.

However as some of these items may be the biggest purchase that you make we would always advise that they are insured.

What influences the premium?

The value of the asset is one of the key factors in the premium cost but contributing factors are:

  • Type of asset
  • Location
  • Security
  • theft attractiveness
  • claims history
  • risk management

What can you do to manage your premium costs?

A lot will depend on what the asset is but there are a number of ways that you can help manage the costs of the cover.

  • Ensure buildings are well maintained. Gleaning gutters, fixing damage caused by age or wear and tear, clear extraction ducts and have a regular inspection of the property
  • Security – the majority of insurers have a minimum security condition that you will be required to comply with. This could stipulate the type of locks on doors, windows or a minimum alarm system that needs to be in place. Firstly you need to make sure you can comply with this. If you surpass this or upgrade the security then make sure your insurers are made aware.
  • Stock – like with security conditions there may be terms applied as to the storage of stock. Stillage conditions are common place but for high risk stock you may be asked to cage or have specific security conditions applicable. By considering this prior to taking cover or looking at how you can minimise damage or theft to your stock this can save you on what could be costly risk requirements imposed by an insurer.

What are the main issues in the property market?

Under insurance

This has been major issue and from the statistics recently produced show that 9 out of 10 commercial buildings are not insured for the correct value with, on average, they are only covered for 69% of the actual value.

This isn’t just an issue for commercial properties. Its estimated that almost 600,000 high value homes in the uk are currently underinsured.

So what’s the issue?

Recently I helped a client who had a high value home insurance policy. They had cover in place but the property had been renovated and this work hadn’t been taken into account when reviewed the cover. When we evaluated the sum insured on the policy against what his actual exposure was we worked it out that he was only insured for 56% of what he should have been

What most policies have is a condition called AVERAGE in them and what this says is that they will use the % against the actual insured value on the policy. So if the client had a £100,000 loss then they would only get £56,000

Flood

A lot if insurers use there own flood mapping which can cause issues for clients looking for alternatives.

Although flood-RE was launched a few years ago that only protects residential properties and anything built or converted to residential after 2009 isn’t acceptable to the provider.

This was highlighted working with another client who, in 2010, had converted an old barn into a their luxury home. Quotes were obtained and some had flood exclusions in the wordings and some didn’t. The confusion surrounding the construction, conversion and availability of flood cover was difficult for the client to understand and we helped then select and place the correct cover to protect them. This wasn’t the cheapest but accepting that policy would have left them exposed.

Large sum insured exposure

Property insurance has always been something that insurers have traditionally wanted to write as it tends to be profitable and simple to cover. However a series of large losses have made the insurers review their stance and now a number a looking at reducing their exposure to large losses. In some circumstances the insurers will not provide full cover to large sum insured single location properties due to their change in risk profile. This means that where traditionally a property may be insured with one insurer for all losses, now there may be 3 or 4 insurers providing different limits of cover to protect the property. This may result in premium increasing, excess being higher and in some areas cover being reduced.

Hardening Market

This is something we have mentioned earlier and is an issue for property and its not just for large exposure risks. Insurers are looking to increase premiums a they look to cover existing and potential future claims.

Cladding

This has been in the news a lot recently and can be a big issue going forward with the property market.

Following on from Grenfell and the Cube fires the market has become concerned with the type of cladding used on properties and the potential for fire and loss of life.

This has resulted in huge premium increases for apartment blocks and properties where there is cladding.

Although the UK Government have announced a fund to support the inspection and replacement of cladding this will continue to be an issue.

With over 25 years of placing insurance covers to protect individuals and businesses True Broking Ltd can assist in helping you with any requirements and leave you confident that your asset it protected.

To discuss your requirements or any other property issues you may have then contact us on 01204 201800 or email us at office@truebroking.com

About the author 

Chris Boothman

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