Is your care home insured for the correct value?

Price rises affecting us all

With high energy prices and the cost of doing business increasing dramatically, companies are struggling to keep up. Care homes are no exception, and the increase in construction costs is having a significant impact on their insurance coverage.

Why construction costs affect insurance costs

When you insure your care home building, the sum insured value is based on the reinstatement valuation, which is the cost of completely rebuilding the premises if a total loss occurred. It's important to note that this value is different from the market value of your property. If your building is underinsured, you may not receive the full value of your claim in the event of an incident, as insurance contracts contain a clause called "average." This means that if you're underinsured, you'll only be paid out proportionally.

Rebuild value

For example, let's say your care home is insured for £1 million, but the true rebuild value is actually £2 million due to the increase in construction costs. If there's a claim for roof damage, and your building is insured for only half of the correct amount, you'll only receive half the value of the claim. So, if the claim is for £100,000, you'll only receive £50,000. Can you afford to spend £50,000 out of pocket? How would you feel if you've paid for insurance, but it doesn't provide the cover you thought it would?

Does your policy cover the reinstatement value?

It's crucial to make sure that your building's sums insured are reviewed regularly to ensure you're not underinsured. The only accurate and safe way to find out the true reinstatement valuation is to have a survey from a RICS certified provider. At QCG, we can help with a desktop assessment (depending on the property value), but it's always better to have a physical survey done for complete accuracy.

In conclusion

The increase in construction costs has had a significant impact on insurance for care homes. Underinsurance is a real danger that could present a significant financial risk to your business. It's crucial to review your building's sums insured regularly to ensure that you're not underinsured and that you have the right level of coverage to protect your business from potential losses.

To find out more about reinstatement cost assessments for care home buildings you can speak to our Risk Control Team on 01273 424904