Now I am a simple guy. While I am not particularly proud or arrogant, I like to think that I am not stupid. However, my dealings with the loss adjustor and the explanation of buildings insurance by my own loss assessor made me realise that the world of insurance is a dark and mysterious place, littered with small print and exclusions that guarantee that the insurer doesn’t pay.
So I have insured my home/shop for £xxx amount of pounds to cover a full rebuild. If the whole thing gets knocked down then it will cost £xxx to rebuild. I understand that. You also think to yourself, “Well that £xxx I am insured for is the maximum amount of cash they are going to pay out if something bad happens”. Nope, it doesn’t work like that at all.
I am writing this blog entry so that anyone searching on google for underinsurance can understand the concept precisely. Also, anyone out there with buildings insurance might want to nip off and check out their policy. You see, when something bad happens, a loss adjustor tootles in and does some calculations. He says something like: “By my calculations, the rebuild value of this building is £xyz and you only have insured for £xxx, so the difference between that is 60%, so you’ll have to pay the rest for the building work.”
The thing is that the rebuild value of our property has suddenly rocketed up by £45,000 in 12 months. While property prices fall, I am in a unique position that the value to rebuild my shop/home is more than it would to actually buy it without the business. To me, this makes no sense. But that’s how the world of insurance works.
Now I can imagine that there are a lot of people out there sitting on buildings insurance policies that they’ve put in place when they first get a mortgage or move into a property. Now no-one has ever told me that the cost of rebuilding goes up exponentially every year and that my policy should be adjusted accordingly. And I reckon, there are a lot of people out there sitting on a policy that is virtually worthless.
My warning to you if you have a policy that is older than, say, five years, get a surveyor in to calculate the current rebuilt value of your property and adjust your policy accordingly. For me, in just twelve months, I’ve lost about 35% of the value of the policy, when my loss assessor takes his cut, I’ll probably have to pay 50% for the work.
My only hope is that the Motor Insurance Bureau will pay the shortfall because otherwise I am ruined. Now I am not asking for your sympathy, but I have always believed in taking out full insurance and paying through the nose for protection. However, it seems that when that catastrophe does indeed seek you out, you might as well put all that insurance money in an old sock and gamble it on black on the roulette table when the disaster strikes because that’s how I feel buildings insurance goes.
The same can be said of business interruption cover. I kind of expected an interim payment to help cover the commercial mortgage, but that doesn’t pay out until I restart trading. So, if you do end up up the creek with out the proverbial paddle, you will have to start trading before you get a penny. This is disastrous if you are in a business like ours that requires constant cashflow.
On the other hand, the company dealing with out contents insurance (and are also dealing with our temporary housing) have been exemplary.
Tomorrow, we are restarting the shop. The newspapers are scheduled for delivery in the morning and myself and The Missus will be working in the dark, with the aid of a couple of wind up torches, trying to get the newsrounds together. Then we plan to open the shop, running the till off a car battery and closing when the daylight fades.
Great life, innit?

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