Underinsurance is always a factor in the property sector, but as modern regulations mean commercial premises cost more in repairs and maintenance this means valuations on risk need to be assessed every year.
As energy bills rise and regulations tighten, more homes and commercial properties are being upgraded with better insulation, cleaner heating systems, and sustainable materials. However, these essential changes are driving up rebuild costs and widening the underinsurance gap, according to a revealing new report: ‘Energy efficiency retrofits, rebuild costs, and underinsurance’ by RebuildCostAssessment.
Sharon Masters, Surveyor & Technical Lead at RebuildCostAssessment, commenting on the findings of the report said: “These upgrades add costs but if the insurance cover stays the same, the risk of underinsurance increases, and with most UK buildings already underinsured, the gap is widening fast.
“A £50,000 energy retrofit might slash a client’s bills, but it could also leave them underinsured. The widespread installation of new high specification insulation, heat pumps and solar panels means rebuild costs are climbing fast. Unfortunately, most buildings insurance policies aren’t keeping up, leaving property owners exposed.
‘an underinsurance time bomb’
“Energy efficiency upgrades are good news but if insurers aren’t told about them, and policies aren’t updated, an underinsurance time bomb is potentially being created for many property owners. Brokers can play a vital role in making sure this doesn’t happen.”
With new energy efficiency deadlines approaching, particularly in Scotland, thousands of properties are undergoing upgrades that could significantly alter their rebuild value. With 76% of all UK buildings currently underinsured, which equates to 7-8 out of every ten buildings, widening the underinsurance gap even further is a very worrying prospect.
The full report ‘Energy efficiency retrofits, rebuild costs, and underinsurance’ can be accessed via: www.rebuildcostassessment.com/technical-insight/energy-efficiency-properties-underinsurance
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