If you ask anyone who owns their own home “what is your house worth?” the chances are they can tell you, within 10%, what the property would fetch on the open market.
Even with the slump in house prices seen in the UK, homeowners are still switched on enough to know the market value of their property.
If you are a commercial property owner, then things become a bit more difficult. Commercial property prices have taken a bigger hit than residential prices, it is estimated that in some areas of England prices have dropped more than 50% from the summer 2007 peak.
When we are approached for commercial property insurance, one of the few things we will never need to know is the market value. This is irrelevant. What the insurers need to know is the rebuilding cost or reinstatement figure. Simply put, if your building were razed to the ground in a fire, how much would it cost to rebuild it?
If you look around the web for a commercial building insurance quote, you will notice that it is the sum insured that is always asked for. One way to reduce your premium payable, is to ensure that you obtain a quote for rebuilding cost only.
You may think that this is obvious, but if you have had your building insured for years, with automatic index-linked increases, your sum insured may be too high. Whether this is by 5 or 50% it doesn’t matter, you are paying too much for your insurance. Wouldn’t you rather the money was in your pocket and not your insurance companies?