Underinsurance
Weather Events Demand a Closer Look
Following on from the previous article in the last edition of Brokerwise, we continue to focus on the impact of Co-Insurance or “Underinsurance” as it is more commonly known.
The importance of considering and selecting appropriate and adequate Insurance Policy Limits or sub limits of liability are paramount and should always take into account any possible ‘Underinsurance’ potential impact.
The latest weather perils that have impacted Queensland and Australia generally over the past few months highlight the need to look at various points that require consideration. These are:
- Current relevant Laws
- Replacement Material Costs
- Removal of Debris.
Point 1: There have now been changes to both State and Federal Laws regarding the required ‘wind rating’ of roller doors used in commercial buildings. Following the various cyclones and storms, insured clients discovered that because they had ‘old’ roller doors that didn’t comply with the new building laws, they didn’t have an adequate sum insured to pay for replacement with new ‘legally compliant’ doors.
Point 2: Both local and imported building materials have risen in cost due to demand after the various weather events. As such, insured clients have experienced first hand the impact of not ‘setting’ an adequate Sum Insured only to find that they were sometimes grossly underinsured, and as such, had claim payments and settlements considerably reduced. Consideration also needs to be given to both the a) extra time and b) extra costs related to imported materials.
Point 3: In this scenario, the Removal of Debris limit becomes applicable. As there are many buildings that still have varying degrees of asbestos sheeting or materials as part of their overall construction there is large cost associated with both the a) removal of debris (following an Insured loss) and b) the replacement of the damaged area. Further, there can be a ‘flow on’ effect where Increased Cost of Working Policy sub limits may also be required to be utilised following this kind of loss.
Your insurance broker can advise on policy coverage and adequate Limits of Liability required for your circumstances. Following your broker’s advice will result in better outcomes during the claims process.
