Key Issues that may invalidate buildings insurance over GP surgery premises
It is important that insurance cover for your premises remains valid. Failure to obtain correct cover may invalidate your insurance, resulting in financial loss in the event of building damage. We outline common scenarios in which this can occur.
Property ownership updates following partner changes
Buildings insurance should be in the names of the individual current partners in the partnership. When partners retire or join the partnership your buildings insurance policy should be updated to reflect the current partners in the partnership. This issue can also arise where a partner passes away and remains on the insurance policy.
If the insurance policy is not in the names of the current partners (or there is a deceased partner named on your insurance policy) your policy could be invalid and you may not have cover in the event you need to make a claim. It is essential that you notify your insurers of any changes in the partnership to ensure the policy remains accurate.
Change of use or occupiers
If the surgery, or part of the property, has undergone a change of use or there has been a change in the occupiers at the premises it is important to inform your insurer. This can occur if new tenants have moved into part of the premises, for example if a pharmacy tenant has left the premises and a dental tenant, or even a new pharmacy tenant, has taken over occupation.
Failing to keep your insurance policy up to date with this information can result in your policy not covering risks associate with these changes and may still invalidate your cover in connection with other risks.
Insuring for loss of rent
If you have occupiers in part of the premises, not only should you ensure the insurer is aware of the occupier's name and use at the property but you should also obtain insurance against the potential loss of rental income from the occupier.
Most mortgages commonly require that insurance is in place against the risk of loss of rent for three years. Failure to keep your insurance up to date in this regard may be a breach of the conditions of your mortgage.
Your lease to the occupier may stipulate particular insurance requirements and the lease should be reviewed to ensure you are adequately insuring the premises in accordance with your obligations.
Insuring to the reinstatement value
A common error in buildings insurance policies is cover for the building only being insured up to the market value of the property rather than its reinstatement value (ie the anticipated cost for rebuilding the value). This is also a common requirement in most mortgages. The reinstatement value of a property is often higher than its market value as it includes considerations for demolition and site clearance.
You should review any valuation you have for the property to confirm the reinstatement value and ensure that your insurance cover is adequate. You should be aware that valuations are only valid at the time they are provided and some valuations only provide estimated reinstatement figures. You may require a full reinstatement value by a structural surveyor or the insurer may need to undertake a reinstatement valuation for the premises.
Vacant Premises
If you vacate your property, or any part of it, for an extended period this can pose increased risks, such as vandalism, theft and water damage to the property, and may invalidate your buildings insurance if the policy requirements are not met.
Insurers often impose conditions such as regular inspections or additional security measures where properties will be left unoccupied for an extended period of time.
If you do vacate your property, you should immediately notify your insurer and adhere to any requirements they impose.