Everyone is aware that they need to insure their homes and business premises, but many people could be inadvertently paying too much, or perhaps worse, not enough. It’s not just a question of finding the lowest premiums, but of ensuring that the policy correctly covers the replacement cost of a building. You might know the value of your property, including the land, but how much would it cost to replace the buildings in the case of a serious incident?
Over the last ten years the Consumer Price Index (the annual average costs of consumer goods) has outstripped the Building Price Index (current construction costs), leaving some policy holders unaware that they were paying too much and others not enough.
Most insurers will seek to pay the minimum amount possible on a claim for damage and will base a payout on the current cost of construction and renovation. However, a lot of people forget about the demolition costs, re-design and inflation that affects a buildings replacement cost.
Also, if your premium has been rising with the CPI you could be over insured, protecting your property with an unnecessary level of cover. On the other hand, if you have not reviewed your policy for a few years you could find that the replacement costs have now overtaken the amount your policy covers.
Mitchell Brandtman Quantity Surveyors have recently undertaken Replacement Costs Estimates for several major businesses and have found worrying disparities in their clients’ level of cover. In one case a Body Corporate discovered that because they had increased their premiums with the CPI rises, they were over-insured by $500,000.
In another more alarming case, a Brisbane commercial property owner discovered that they were under insured by 60% – the rising costs of building and construction having outstripped the value of their policy. Unfortunately they found this out too late and the client had big problems with their insurer on top of another big problem of losing their tenant.
It’s wise to seek out the best value insurance, but you have to make sure that the policy matches the current replacement costs. If you have been increasing your cover every year by CPI or BPI, then it’s time that you had your property replacement cost re-done.
Regularly assessing the cost of replacing a building could save you a lot of money in premiums or could save you from having to face a massive shortfall. Mitchell Brandtman will provide you with certainty and peace of mind with the knowledge that you are adequately covered.
Mitchell Brandtman has been established for over 40 years, and specialises in providing construction cost advice to home owners, investors and developers. To discuss a Replacement Cost Estimate for your property or business premises, contact Luke Anthony, Asset Services Manager on (07) 3327 5000