Article date: 24 March 2009
Property owners are putting themselves at risk of facing huge costs by not insuring their properties to the full reinstatement value, warns Norwich Union, soon to be Aviva.
A sample of 128 valuations carried out by the insurer revealed that 86% of those properties surveyed were significantly underinsured, with the difference totalling £314m.
Mike Colmans, property owners underwriting manager for Norwich Union, said: "Having accurate sums insured on a property is vital to guarantee receiving the full amount in the event of a claim. As many as 50% of claims for damage to buildings are being settled below the cost of reinstatement, which could have a significant impact on property owners who would have to fund the difference themselves.
"Previously, property owners would have had the option of borrowing money to meet the surplus cost but given the economic climate and limited access to credit this may not be possible. Therefore a significant shortfall in the claim settlement could mean that the owner would have to sell their property at a greatly reduced price.
"Having a professional valuation carried out on a property will ensure it is valued for the correct amount. Often valuations are undertaken for bank or sale purposes and these may not accurately reflect the total cost of rebuilding a property.
"Generally if a building itself is underinsured, it is likely that the contents of that property will also have inadequate cover, meaning that the total sums insured are inaccurate. When insuring the buildings it is important to remember to include the replacement value of fences, garages and other outbuildings, as these are frequently forgotten but must be taken into consideration when calculating sums insured."
Roger Corp, director of Barrett Corp & Harrington Ltd, independent valuers working with Norwich Union, said: "The recession has led to significant reductions in the market values of buildings. This has led to some property owners questioning whether there has been a similar reduction in reinstatement values and whether building sums insured should be similarly reduced.
"Whilst property owners may be looking for savings in these troubled times, it is important that this is not at the expense of insurance cover. They should consider a valuation immediately as they may not have sufficient reserves to deal with the consequences of underinsurance.
"Moreover, directors, trustees and others who are responsible for arranging insurance cover may find that they are liable if they have not taken steps to arrange and maintain adequate cover."
For further information, please contact:
Elinor Graveson at Staniforth on 0161 919 8025 / 07973 360141 or Vicki Burn on 01603 684 224 / 07800 692909.
Notes to editors:
Norwich Union is the UK's largest general insurer with a market share of around 15%, with a focus on insurance for individuals and small businesses.
It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK.
In the summer of 2009 Norwich Union will change its name to Aviva. Aviva is the world's fifth largest insurance group and operates in 27 countries. Aviva is to become the customer brand worldwide, thus enabling the company to compete even more effectively on a global scale for the benefit of customers, staff, business partners and shareholders.
Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.