Real Estate Investor Magazine South Africa May 2014 | Page 54

SMART MOVES

BY THOMAS MILLS

Don’t get caught
Make sure your business is insured at replacement value

C

ommercial and office buildings are more at
risk during the hot, wet summer through
storm damage than at any other time.

Many small and medium sized enterprises (SMEs)
which own their own premises could be in for a rude
surprise on making a claim to discover their premises
were grossly undervalued - leaving them to foot much
of the damage bill themselves or even close down.
Valuations of land and buildings are done for various
purposes, most of which require a “market valuation”.
However, for insurance purposes the valuation should
be for “replacement value”. It’s important you ensure
that your policy covers replacement of your property
- because unlike other assets you need your premises
to conduct your business; and secondly that the actual
amount insured is in fact the correct replacement value.
The main reasons for properties not being insured at
replacement value are either this basic misunderstanding
of the term, poor advice or occasionally trying to save
costs. However this is one of those circumstances
where, while there may be a relatively small risk of
occurrence, when it does occur it may shut down your
business for good if such a mistake has been made.
Larger corporates tend to be better advised in this
regard but SMEs are often less insurance-savvy. The
same applies with insuring and valuing key plant and
equipment. A second com [ۈ