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"A sample of just 47 valuations carried out for Norwich Union revealed underinsurance of buildings totalling £130 million. Brokers need to highlight that professional valuations are essential to ensure accurate cover, according to Mike Colmans, property owners underwriting manager, Norwich Union: "Under a lease agreement, property owners are obliged to insure their property for the full rebuild cost.
"Often however, property owners will have had a mortgage valuation done, which may not take into account all of the elements involved in the building. For example, the cost of replacing walls, gates and outbuildings or removing debris. Therefore, the building will be underinsured and the figure may become increasingly inaccurate over time.
"This can have a significant impact on any property owner when it comes to making a claim. Clients need to be aware that if adequate insurance is not taken out, tighter lending conditions and increased borrowing costs due to the credit crunch could make it very difficult to find the necessary funds themselves to rebuild a property."
Colmans continues: "As it is usual for the tenant to fund the premium, it is a common misconception amongst property owners that they are doing their tenant a favour by saving them money if the property is valued at a lower amount.
"It is therefore essential that the property owner is aware of and meets their lease obligations, and the resulting premium is calculated on the correct basis.
"This makes it vital to have a professional valuation carried out on a property. Norwich Union has a preferred suppliers scheme, so we can recommend a trusted, RICS surveyor to carry out the valuation at a discounted rate." (CS della Società)
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