commercial building insurance

**Marshall** · 28-01-2013 07:38 AM

Hi everyone
I am very confused and looking for clarification. I rent a commercial property and therefore have to contribute towards my landlords building insurance. Is the insurance premium calculated on current property value or on previous valuation say 2008?

**ashburnham** · 29-01-2013 08:28 AM

Insurance premiums are calculated using many different factors. The value of the property is not normally used and it is in fact the rebuilding cost that it should be based upon. The rebuilding cost, or building sum insured (BSI) as it is more commonly referred to, is usually obtained from an up to date building survey.

Regardless of what it should be based upon, the insurance premium will only be calculated upon the declared values at the time of taking out the insurance. Some people like to declare a slightly higher BSI than their survey suggests just to give peace of mind that they are not under-insuring their property.

Another thing to keep in mind is that the BSI may change each year due to index linking by the Insurance Company.

**Marshall** · 29-01-2013 20:18 PM

Thankyou for the help ashburnham.
I do understand that the insurance company will calculate the premium on the declared value and the landlord is going to over insure but can he do so to the tune of approximately £80,000! Surely not??
Please advise.

**ashburnham** · 30-01-2013 08:53 AM

From the insurance point of view, there is nothing necessarily wrong with over insuring by any amount as you will only be able to claim for the true rebuilding cost at the time of a claim. A vaguely similar thing happens every day in the car insurance world when you declare the value of your car to be £10,000 which was the price you paid the dealer then when you come to claim for a total loss a week later they give you the market value of £8,000. You could of said it was worth £20,000 and potentially paid extra premium but obviously would of been a waste of money as £8,000 is the max they would of paid.

Anyway, moving away from the insurance view and taking a personal view, if the property is say, £150,000 BSI and the landlord is insuring it for £230,000 BSI and there is evidential proof of this (i.e. an up to date building survey) then surely you are allowed to challenge why the landlord is over insuring by such a large amount especially if these additional costs are being passed on to you.

I'm sure one of the legal/lease experts here can give some further advice on how you stand with this.