Whether you’re setting up or renewing insurance, you will want to ensure that you are getting the right level of cover within each section of your policy. Making a claim can be stressful enough without discovering that the proceeds won’t actually cover all the damages. So, once you’ve worked out what types of insurance your charity or Scout group needs, you should calculate the full cost of recovering from the dreaded worst-case scenario. 

To clarify some insurance jargon, the amount you declare on your policy is known as the sum insured or insured value. This is the maximum amount you could receive (minus any policy excess) if you made a successful claim. It is essential that you get this figure right, because if you insure your property for less than the amount needed to replace or rebuild it, you will be underinsured. This means that, if your entire property was destroyed, you would not receive the full amount needed and your organisation would have to cover the remaining costs itself.

This guide is here to help you avoid underinsurance and the disappointment of an insufficient claim.

The sum insured for any building, no matter how old it is or what it’s used for, should be the current rebuild cost. This is not the price that was paid to purchase it, nor its value on the property market. The rebuild cost and the market value can be vastly different. For example, a building worth £1 million due to its favourable location may cost half as much to rebuild, while an old listed building in an undesirable location may only be worth £200,000, but due to complicated construction features it could cost £300,000 to rebuild. It is therefore essential that each element of the property is priced up accordingly.

Step One: Mark your territory

Buildings insurance should cover all the fixed parts of your property, from the walls and windows to floors and fixtures. You should also make sure it covers all of the external features you own, so take note of any:

• driveways and garages;
• sheds and outbuildings; and
• walls, fences and gates.

Step Two: Calculate rebuild costs

This is the most critical stage and you may wish to consider using professional valuation services to help you decide on your sums insured. Your insurance broker may be able to help with estimating the rebuild costs, but you should make sure they include:

• demolition and debris removal; 
• architects, surveyors and other legal fees; 
• materials and manual labour;
• VAT (as necessary);
• public authority or planning fees; and
• inflation or other increases in costs that may occur during the policy period and while rebuilding.

Step Three: Inform your insurance broker

Once you’ve worked out the necessary insured value, contact an insurance broker who can run through your requirements, provide any further advice, and arrange suitable cover for you.

Step Four: Reevaluate your buildings sum insured regularly

With continually fluctuating costs of resources and services, you will need to reassess your rebuild costs regularly. We recommend you have your property professionally valued at least every three years to be safe, but there’s no harm in getting an annual assessment.
 

Buildings and contents are often covered in a combined policy, but you will still need to evaluate the items you own separately. And just like for buildings, the sum insured for contents and equipment should always be the current cost of replacing an item with a new one, like-for-like or the most similar available option.

Step Five: Make an inventory

• Make a list of all the items you own, from large items such as cars and marquees, to small items such as kitchen utensils or office furniture. 
• Identify any items that you hire out to other organisations.
• Make a separate list of items that you hire in or borrow.
• Note down when and where each item will need to be insured, for example in storage, in transit, and at events.

Step Six: Research replacement values

Estimate or investigate the replacement value of each item if it had to be bought brand-new. This is not always the price you paid for it, especially if you bought it several years ago or second hand, and should not be considered “free” if it was donated as a gift. If the item is no longer manufactured, find the value of a new equivalent version. And if you own any specialist or complex equipment, you may wish to talk to the supplier about the price and availability of suitable replacements and repairs so as to avoid any hidden costs. Finally, check the list and values against your current insurance policy, if you have one, to make sure you are still sufficiently covered.

Step Seven: Inform your insurance broker

Once you’ve got an accurate impression of how much all of your contents and equipment is worth (and you might be surprised how the little things can add up!), you can bring in an insurance broker to arrange a suitable policy. If they offer a combined buildings and contents insurance, check that the policy accounts for everything you’ve noted in steps five and six.

Step Eight: Reevaluate your contents and equipment sum insured regularly

Just like buildings, the replacement value of some contents and equipment will fluctuate, usually increasing over the years with inflation and rising costs of production. Keep an eye on the current cost of specialist equipment as this may be where the biggest increases are.

Step Nine: Keep your inventory up-to-date

Whenever you buy or receive items, remember to add them to your inventory, and likewise remove anything that you have given away, disposed of, or has reached the end of its useful life. You don’t want to pay insurance for items you no longer own.
 

Step Ten: Update your policy

You should contact your broker whenever your building’s market value changes, if you add any new features, such as a garage, or upgrade fixtures such as doors and windows. Likewise, let them know if you remove or sell any parts of your property so they are no longer covered in your policy. As for contents and equipment, you should advise your broker about any purchases that increase your insured value, but similarly let them know if you no longer own any items originally listed to avoid paying for cover you do not need.  
 

At Unity, we want every charity to get the right level of cover to protect their finances in the event of a loss, thereby allowing their crucial work to continue. We provide advice on how to assess and calculate your sums insured.

For Scout and Girlguiding premises insured on our Property and Equipment policy, we can also provide a free buildings estimation service. (This free buildings estimation service is only available to Scout groups and Guide units, whose buildings are insured with Atrium. You can find out if you’re insured with Atrium by checking name of the insurer on your schedule of cover.)

As a specialist broker, we understand the wide range of activities that charities are involved in and can put together a bespoke policy for your needs, such as Short Period Property and Equipment cover for whenever you borrow or hire equipment. 

For more information and to discuss your insurance needs, call our friendly team of experts.