It’s the time of year when we should all be thinking about resolutions. If you are a business owner, you could do worse than resolve to check that your business property is insured for the correct rebuild cost.
This is partly because the costs of the materials that you would need to rebuild your property, should it suffer something hugely damaging such as fire, serious flood, storm impact or terrorism damage, have increased significantly. It is further impacted by wage increases, in part due to construction-sector labour being in short supply post-Brexit. Between 2020 and 2021, 1.5m workers were lost to the construction sector.
Cost pressures have also been applied by Chinese demand for steel on the world market and extended lead times for all materials.
The costs associated with the specialists you would need to employ for a rebuild have also increased, as professionals, including surveyors and architects, have to respond to dramatic rises in the cost of professional indemnity insurance in their sector by either passing on the costs or facing financial perils as a practice.
A survey has found that most commercial properties are not insured for the right amount in the UK, with more than 84% either underinsured or insured for too much. Many business owners have insured properties on the basis of ‘market value’, rather than rebuild cost.
Even if the rebuild cost was calculated correctly, this could have been some years ago when the insurance cover was placed. The price rises in the costs of building materials that we are seeing now make it important to check how close your buildings sum insured is to the actual amount you would be likely to have to pay, if you needed to rebuild your property.
In October 2021, the BCIS House Rebuilding Cost Index, calculated for the Association of British Insurers that domestic buildings insurance policies can be index-linked, showed an annual increase of 8.8%.
The cost of materials for ‘all work’ increased by 23.6% between September 2020 and September 2021.
The cost of steel in this period rose by 72.6%, and that timber climbed by 73.3% during the past 12 months. Even the cost of paint has risen by nearly a third.
With price rises expected to affect construction well into 2022, as the Construction Products Association said in August they anticipated issues to continue for six to nine months, and the Federation of Master Builders (FMB) believed the situation will last throughout 2021 , it is time to resolve to calculate what your business’s property rebuild cost would be, and keeping this regularly under review.
If this seems daunting, ask your broker to assist and guide you through how your sum insured should work, for both your property’s fabric and rebuild, and the contents you own. Doing this now, and getting your figures in order, could prevent heartache at a later date