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An insurance claim should be a straightforward process. You pay your insurer a premium and when you have a loss they send you a cheque to cover the claim in full and happiness prevails! Unfortunately in the real world the above rarely applies.


The problem is that sums insured (Declared Values) are often guessed, often inadequate and frequently based on misunderstood criteria. An old run down building in a poor area with shabby furnishings may well have a low market value, but that is irrelevant. The insurer will pay for the full cost of rebuilding and re-furnishing the property as new. That is a very good deal for a club. But in order for the club to qualify for this deal it must provide the insurer with accurate reinstatement figures on a new, not a second hand basis.


Be aware that the club is fully responsible for providing the insurer with correct values and it is the club, not the broker or insurer who will be penalised in the event of an underinsured claim.


Data produced by insurers and surveyors prove beyond any doubt that in at least 50% of cases the sums insured (Declared Values) bear little resemblance to the correct figures. In these circumstances insurance will not be sufficient to ensure recovery. Worse still, even when by some fluke figures are adequate the insured usually has no inventory of contents and no way of formulating and proving a claim to the insurance loss adjuster.  


The result is that the cost of repair and replacement of assets is resolved in two parts. Part one is a figure paid by the insurer. Part two is a figure paid by you, the insured. The percentage of each contribution is determined by the accuracy of the Declared Values.


Example. You insure the buildings for £750,000 and there is a fire causing damage of £100,000. The insurance loss adjuster proves that theoretically the building would cost £1,000,000 to rebuild. The claim would be settled perfectly legitimately using the ‘Condition of Average’ clause found in every policy. The damage is only 75% covered by insurance and the contribution of each party would be apportioned as:


Insurance Company - £75,000. The Insured - £25,000.


The contents are likely to be similarly under insured making a further contribution from the club necessary. If you under insure you are acting as your own insurance company for part of the risk. Only the club can judge what level of contribution is manageable but Clubs 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 for them to find the necessary funds to rebuild and re-furnish a property.


All sums insured should be based on a Valuation conducted by professionally qualified Valuers. Information on the services provided by Bennett Kaye Chartered Surveyors is covered on the appropriate pages of our web site.