In a recent review for a client on their building insurance, our client witnessed first hand how easy it is to be under insured.
In this instance, our client owned a 2,850 m2 industrial building in the north-west of Melbourne VIC.
It was constructed of precast concrete walls to a height of 1800mm high to the external walls, then the remaining upper portion of the walls was metal clad. The roof was steel portal frame and steel sheeting. A small internal office and mezzanine level was also present. The external car parking or hard stand area was a concrete slab on ground with storm water pits and small portions of kerb and guttering.
The current insured sum was provided to us by the owner as being made up of:
The owner was unaware of the total square metres of the development at this time.
We conducted a site inspection and measured up the size of the development as plans were not available.
In summary, it was our opinion that the development was currently under-insured. Upon completion of our report, we estimated the replacement cost of the contraction of the warehouse and the car park to be in the order of:
In addition to this, we also noted to the client that allowances for time escalations must be included in the replacement value of the development. We provided the following time escalations to the development.
Once we add the constructions costs and the escalations together, you can see that the existing insurance replacement cost of $1,321,750 was grossly under insured.
It was our recommendation to the client that the industrial warehouse be insured for $3,113,388 exclusive of GST.
Unfortunately, we see this under insurance all to often and hope that these examples can highlight the importance of having your property assessed by a qualified Quantity Surveyor to accurately determine the actual replacement cost of your development.