Tariffs, which are taxes charged on imported goods from other countries, have been placed on many individual countries as well as whole industry sectors. The most note-worthy are the tariff rates placed on China and India. 

Since then, the impact of these tariffs has rippled through global supply chains, with other countries introducing counter measures. This has created knock-on effects across individual sectors and asset costs. 

In this article, we examine how tariffs are quietly inflating the cost of assets, and why UK businesses need to be vigilant to mitigate the risk of underinsurance.

What is the new tariff landscape? 

In August 2025, new tariff rates for many countries were introduced to correct, as Trump has named them, “unfair trade”. The most notable of which is that placed on China – a 34% additional tariff rate on Chinese goods set to take effect on November 10th. This is in addition to the existing average 10% baseline tariff rate set earlier in 2025.

India has also seen a 50% tariff rate enacted. Already, this rate has impacted around 55% of Indian exports to the U.S.

As at 1st August 2025, the average effective U.S tariff rate was 15.8% according to JP Morgan.

Both tariffs on China and India are having, and will continue to have, a significant impact on global supply chains.

To offset U.S. tariffs other countries have introduced counter measures including economic stimulus packages, sector specific controls or their own reciprocal tariffs.

The UK has attempted to refrain from tit-for-tat tariffs on U.S. goods but it has implemented a 10% import duty on US goods to counter the base 10% tariff introduced by Trump’s administration. For a UK business importing goods from US manufacturers, they are now paying higher costs. 

With the rollout of these tariffs, businesses need to rethink how they approach setting their declared values for property damage insurance coverage, particularly in sectors where there is a high degree of overseas sourced materials or equipment. 

The effect of tariffs on the supply chain

It is already clear that importers of materials and goods are passing on tariff costs to consumers and businesses in terms of higher pricing. Many are also looking to widen their supply chain to seek suppliers from countries with lower tariffs or to market their goods to lower tariff markets. 

The existing tariffs on low cost manufacturing countries such as China, will increase the overall cost of these goods to U.S. businesses, and importers are likely therefore to look to Europe, South America or elsewhere in Asia for alternative suppliers.

In practice, this is likely to change the supply chain environment, disrupting current channels and, while this could create longer term opportunities, it may have a short term inflationary impact across certain markets.

Overall, tariffs are impacting the global supply chain, with costs going up and countries like China and India having to rethink the markets for their goods and whether their place in the current supply chain is still economically viable.

Which UK industries are most vulnerable to these rising costs?

With geopolitical cost pressures stemming from tariffs in India and China especially, on top of the UK’s 10% tax on goods exported to the US, many sectors are facing vulnerabilities. The introduction of tariffs on British goods will increase their price in the U.S., likely leading to a decrease in demand.

Here are some of the industries that are most exposed to these risks. 

1. Car manufacturing

In 2023, the U.S. was the UK’s largest market for cars, with UK car exports to the U.S. being valued at £7.6 billion in 2024. Despite this, in April this year, a 25% tariff was placed on vehicles exported to the US. 

UK car manufacturers may be forced to shift production to the U.S. to avoid these charges. This could cost an estimated 25,000 jobs in the UK, with employees at Jaguar Land Rover and Mini facing the highest risk.

2. Consumer goods and retail 

Clothing and footwear retail stores that source materials from across India and Asia, may see higher costs and reduced demand. 

UK retailers JD Sports, Dr Martens and Asos are amongst those most at risk due to having a high percentage of their sales in the U.S. 

3. Steel and aluminium 

The U.S. is currently the second largest market for steel and aluminium exports. UK exports to the U.S. totalled £388 million in 2023. 

While the UK was exempt from the tariff increase to 50% on steel imports in June 2025, the tariff rate for the UK on steel and aluminium remains at a high 25%. 

The EU announced reciprocal 50% tariffs on imported steel, including the UK, in early October 2025, shocking the UK steel sector.

How can businesses protect themselves from the impacts of these high tariffs?

The high-stakes, volatile nature of these tariffs has created a lasting ripple effect across the globe. This means it is more important than ever for UK businesses across many sectors, particularly those most vulnerable, to implement protective measures. 

Thanks to higher costs, the declared value of assets may be too low for adequate insurance coverage. Declared values that rely on older figures may now be insufficient and put businesses at risk.  

• The costs of imported materials and components have significantly increased in recent years, exacerbated by new tariff rates. Therefore, using pre-Trump presidency values is no longer viable.
• Using general inflation in insurance policies will not account for the jump in industry-specific tariffs, such as the 25% tariff placed on exporting cars to the U.S. 

Mitigating the risks 

There are ways to reduce these risks. If declared values have not been reviewed in recent years then consider if any of the following are likely to have impacted values:

• Tariff percentages and their projected overall increased costs
• Price premiums caused by disrupted supply chains
• Changing foreign exchange movements
• Geopolitical turmoil adding extra time to replace assets

Talk to us today on ways to protect your business

Businesses are at risk of being underinsured and unprepared for worst case scenarios. Get in touch with Charterfields today to ensure your declared values reflect recent changes and your assets are protected. 

The post The Ripple Effect: What Tariffs Mean for Asset Values appeared first on Charterfields Limited.

Our annual underinsurance report identified healthcare as one of the sectors most exposed to underinsurance. While a level of underinsurance is notable across all industries inspected, the hospitals, care homes, and clinics locations we inspected were underinsured by more than 100 per cent, i.e. they were insured on average for under half of the assessed current reinstatement cost. This means that in the event of a major loss, many healthcare providers would receive a significant shortfall in the funds needed to reinstate their assets.

In this article, we examine why healthcare organisations are especially vulnerable to underinsurance, the consequences for providers and patients, and the practical steps that can help you ensure that your declared values are accurate.

What does underinsurance mean for the healthcare industry?

Underinsurance is when a policyholder has inadequate insurance for their needs – essentially, for property damage cover, this means the declared value for the assets on an insurance policy is lower than their true reinstatement cost. In practice, this means that if a claim is made, insurers may invoke the ‘average’ clause in the policy and pay-out only the ratio of the declared value to current reinstatement cost, meaning the policyholder would need to find additional funds to repair or rebuild the insured property to its full operational standard.

Unlike some industries where there may be ways and means of mitigating the impact of underinsurance, hospitals, clinics and care facilities deliver essential services that cannot simply pause or relocate while funding gaps are addressed. 

The assets involved (medical equipment, laboratories, specialist theatres and complex care infrastructure) are among the most expensive and complex to reinstate. On top of this, providers must follow strict regulatory and compliance obligations, meaning any reinstatement must not only replace what was lost but also meet modern standards.

As a result, underinsurance in healthcare not only poses a financial risk; ultimately, it may threaten the ability to deliver patient care.

7 reasons why the health sector is particularly vulnerable

Healthcare providers face a unique set of challenges that make them particularly exposed to underinsurance. These include…

1. High-value medical equipment

Advanced diagnostic and treatment machines such as MRI and CT scanners, and radiotherapy equipment, can cost several million pounds each. With turbulent inflation and foreign exchange rates, a policy based on outdated figures can easily fall short by millions. For example, an MRI scanner valued at £1.5 million five years ago may now cost over £2 million to replace, leaving a significant funding gap in the event of loss or damage.

2. Complex facilities and infrastructure

Hospitals and clinics are not simple buildings. They may contain operating theatres, sterile laboratories, hazardous material handling facilities, intensive care units and specialist pharmacies. Following a major fire, for instance, reinstating a laboratory may not simply be a matter of replacing benches, shelving and storage; it must be rebuilt to current standards, perhaps meaning the enhancement of features such as air filtration and temperature controls.

3. Rising construction and labour costs

Post-pandemic inflation has sharply increased the cost of materials and skilled labour across construction projects. A hospital wing that cost £10 million to build a decade ago may now require more than double that amount to reinstate. 

4. Regulatory compliance and standards

Healthcare facilities must be reinstated to meet current regulatory and clinical standards, not merely like-for-like, which can significantly increase costs. If you were to rebuild an intensive care unit, as an example, it would need to be rebuilt in compliance with the latest infection control regulations, ventilation systems and patient safety protocols. 

5. Frequent expansions and upgrades

To improve patient care, many hospitals and care homes undergo continual investment in new wings, renovated wards or upgraded diagnostic equipment. If declared values are not reviewed following these changes, policies could remain based on outdated asset registers. 

6. Budget pressures 

In an attempt to keep premiums low, healthcare organisations facing financial constraints and limited budgets may be tempted to under-declare values. While this may provide short-term savings, this risks a severe consequence in the event of a claim later down the line. 

7. Demarcation

Healthcare facilities can be some of the most complex in terms of building and equipment services. Areas can have a range of services providing gases, power, air and ventilation. Particularly for leased premises this can cause confusion and gaps in cover where landlord and tenant may not comprehend their insurance obligations.

The consequence of underinsurance in healthcare

The consequence of underinsurance in healthcare extends well beyond financial shortfalls. When hospitals, clinics and care providers are unable to secure the full funding required to reinstate operations, this creates a ripple effect across patient care, compliance and public confidence.

Financial risk

Underinsurance can mean that claims pay-outs fall short of actual reinstatement costs. A hospital underinsured by 50 per cent may only receive half the funds required to replace damaged assets or rebuild facilities, leaving the organisation to find the balance. With high-value medical equipment and complex facilities, this can amount to tens of millions of pounds. For any organisation, this could be devastating.

Operational risk

Downtime in healthcare directly affects patients. Underinsurance delays recovery by either delaying the claims process and recovery of funds from insurers, or leaving providers without the resources to reinstate facilities.

Reputational risk

Trust is fundamental in healthcare, and patients expect services to be reliable. Prolonged closures due to underfunded rebuilding projects can cause lasting reputational damage. Once confidence is eroded, rebuilding it is often harder than reinstating the physical assets themselves.

How to set the right declared values for your hospital or healthcare facility

To reduce the risk of underinsurance in healthcare and safeguard patients, getting your declared values right is key. To help mitigate this risk, our team of valuation experts has put together the following steps to help organisations ensure that insurance cover reflects the true reinstatement costs of their facilities and equipment.

Check declared values regularly: Declared values should be reviewed annually and based on current assets and consideration of current costs. 

Adjust for inflation and market volatility: Medical equipment and construction costs are particularly exposed to inflationary pressures. For overseas manufactured equipment, adjusting for foreign exchange movements may also be prudent every year. Policyholders should monitor market conditions and update declared values accordingly. 

Factor in hidden costs: Often overlooked, declared values to insurers should include allowances for demolition and debris removal, as well as for professional fees e.g. architects, engineering, planning.

Partner with valuers who understand healthcare: Specialist insurance valuation providers with experience in the healthcare sector can provide assessments tailored to the unique aspects of the sector and can also help identify common blind spots, such as high-value diagnostic equipment or the impact of market costs, that may otherwise be missed. 

Get a healthcheck on your declared values

In a sector where ongoing medical care will depend on the rapid reinstatement of facilities, equipment and systems, underinsurance is a risk that cannot be ignored.

Regular professional valuations, careful adjustment for inflation, and a full consideration of compliance and hidden costs are essential steps for safeguarding continuity of care. 

We encourage all healthcare providers to review their declared values for gaps in coverage and, where necessary, seek a professional valuation. 

Speak to the team at Charterfields to discuss your healthcare reinstatement costs and how we can help ensure your assets are accurately assessed and properly insured.

The post How Can the Healthcare Sector Combat the Risk of Underinsurance? appeared first on Charterfields Limited.

At Charterfields, we specialise in insurance valuations, for property, plant, machinery and contents. As an Aviva Specialist Partner, we see first-hand how inflation distorts values and increases the risk of underinsurance. Our latest Underinsurance Report highlights the scale of the problem, and the risks it poses.

In this article, we explore some of the long-term impacts rising inflation, foreign exchange movements and tariffs are having on costs, and what this could mean for policyholders.

How inflation affects insurance valuations

Inflation means that labour, professional fees, permit costs, building materials and plant and machinery are all getting more expensive.

This is why underinsurance is often called the “silent risk”. Organisations think they have cover, but in reality, cost inflation can leave them exposed should disaster strike. Keeping declared values static over several years makes this risk acute, stretching the gap between declared values and true reinstatement costs.

The risk of underinsurance

Underinsurance isn’t just a statistical problem; it’s a financial pitfall that many businesses only discover after suffering a loss. 

Our 2025 Underinsurance Report highlights the scale of this issue for businesses:

• 88% of properties inspected were underinsured.
• More worryingly, 35% had building values less than half of reinstatement cost.
• In 77% of locations the declared values for plant and equipment was below reinstatement cost.
•  For 41% of locations the plant and equipment was insured for less than half of the actual reinstatement cost.

The consequences extend beyond immediate cash shortfalls:

• Business continuity risks – Without a full and prompt settlement after an insured loss, business recovery could be delayed or even unachievable 
• Financing issues – Lenders may withhold or withdraw support if assets are inadequately insured.
• Reputational damage – Suppliers, clients, and investors may lose confidence if operations cannot resume quickly.

In short, underinsurance is not just an insurance problem, it’s a strategic risk to the entire organisation.

What does this mean for policyholders?

Claims settlement risks

Most policies include an “average” clause, meaning that if assets are only insured for half of their true value, any claim payout may be reduced by 50%. Even a partial loss can leave businesses with significant unfunded costs.

Imagine a manufacturer whose building is insured for £5 million but actually costs £10 million to reinstate. If a fire causes £2 million of damage, the insurer will not cover the full £2 million. Under the “average” clause, the claim payout is reduced in line with the level of underinsurance (in this case, by 50%). The business would only receive £1 million, leaving a £1 million shortfall to fund themselves.

Premium increases vs. coverage gaps

While increasing declared value can sometimes mean an increase in premiums, underinsuring to keep costs down is a false economy. The gap between cover and true reinstatement cost leaves organisations financially exposed.

Compliance & governance

Underinsurance isn’t just a financial risk. It can create governance issues, too. Directors may face scrutiny or liability if assets are knowingly or negligently underinsured and the business cannot recover from a major loss.

5 practical steps to protect your organisation

Rising inflation does not mean having to leave your organisation exposed. The following steps can significantly reduce risk and strengthen financial resilience:

1. Commission independent reinstatement valuations

Declared values are often based on book costs or outdated estimates, not the true reinstatement cost. Independent assessments, as provided by Charterfields, deliver objective, evidence-based figures that insurers recognise and can rely upon.

For buildings, this means capturing not just construction costs but also allowances for demolition and debris removal, professional fees and compliance with the latest building regulations.

For plant, machinery and contents, it means factoring in specialist contractors, exchange rates and installation costs.

2. Review policies regularly

A “set and forget” approach leaves cover eroding over time.

Best practice is a formal review at least every three years, but in high-inflation environments, annual reviews or even mid-policy checks may be necessary.

Key additional trigger points include completion of major capital projects, new acquisitions, or upgrades, which can significantly alter total reinstatement costs.

3. Understand indexation limits

Index-linked adjustments can create a false sense of security. If indexation is capped at 3% while real-world costs for construction or machinery are rising at double digits, you could be quickly underinsured.

Ask your broker or insurer how indexation is applied and whether it reflects sector-specific inflation trends.

4. Engage specialist expertise

Plant, machinery and production equipment are often the most complex assets to assess and the easiest to overlook. General property valuations rarely capture these correctly.

Ensuring assets are correctly allocated between categories in insurance coverage requires knowledge of the appropriate demarcations and reconciliation with insurance policy terms.

5. Access independent data and benchmarks

Use sector-specific insights to benchmark your position. For example, our annual Underinsurance Report highlights trends across industries and asset classes, giving you context to challenge assumptions and plan effectively. 

Conclusion

Inflation is not just an economic headline. It can have a direct impact on the protection your insurance provides. Rising reinstatement costs mean gaps in cover are widening, and the risks of underinsurance are greater than ever.

To safeguard your organisation, it’s key to ensure your insurance values are accurate, regularly updated, and based on expert assessment.

Contact Charterfields today to book a valuation or request more information on the Underinsurance Report.

The post What is the Impact of Inflation on Declared Values? appeared first on Charterfields Limited.

In this article, we explore the key reasons why standard reinstatement costs might not apply, and some important factors to consider to ensure that your declared values for property damage insurance cover adequately reflect reinstatement in the event of a total loss event.

The Challenges for Determining Reinstatement Costs in the Food & Beverage Sector

1. Building Specifications

Modern build forms largely focus on steel structural frame and reinforced concrete systems of construction. Critical differences in this sector over conventional buildings relate to design and floor layout, drains, walls, ceilings, factory finishes and engineering aspects of air management and filtration, and equipment design and layout. Some examples include:

• Specialist finishes to walls & floors: Food‑grade wall finishes are more expensive than standard plasterboard or painted masonry. Floors may have heavy‑duty finishes including ceramic tile, PVC, epoxy or resin coatings. If assessments omit these materials or wrongly categorise them, insured values may fall short.
• Drainage: Similarly, drainage systems in process areas are often vastly more complex than standard service specifications. High volumes of water, grease traps, bunding and waste treatment infrastructure often lie beneath process lines. 
• Staff amenities: Showers, hand‑wash stations and changing rooms are standard hygiene requirements for food businesses but might be missed as part of a standard building cost model.
• Additional high‑care facilities: In areas where exposed, ready-to-eat food is handled, enhanced lighting, antimicrobial coatings, non-porous stainless-steel surfaces and integrated cleaning access points are standard. These added costs can raise reinstatement costs significantly and must be valued explicitly, not assumed. 

2. Internal Partitioning & Suspended Ceilings

Partitioning enclosing production lines or clean‑room style processing areas and in industrial kitchens often incorporate high‑grade or specialist materials, including stainless‑steel panelling, hygiene‑rated surfaces and insulated panels. 

Suspended ceilings in these environments aren’t decorative; they can house sprinkler heads, chilled space voids, ducting, filtration and high‑care zone containment. Generic cost models may not consider these specifications. In addition, restoring them post-loss can involve specialist suppliers and costly, complex reinstatement. 

3. Demarcation Confusion – Building vs Contents

Properly distinguishing between what is a “building” and what should fall under consideration as “equipment and contents” isn’t always clear and especially for assets like HVAC service installations, chillers, built-in fridges/freezers, roller shutter doors and CIP (Clean‑in‑Place) systems. If classification isn’t crystal clear, or values declared do not match policy terms, insurers may dispute coverage.

Demarcation between buildings and contents needs careful consideration, particularly the treatment of:

• Insulated chilled or freezer rooms: These often incorporate double-skin floors, walls and ceilings to maintain temperature and hygiene, requiring installer-certified construction, bespoke configuration and sophisticated commissioning far above standard room construction rates.
• High-speed roller doors: Costs to reinstate high speed industrial roller doors can vary significantly, depending on door size, speed, and method of control.
• Shared services: Wastewater treatment, underground catchment tanks, boilers or communal utility lines are essential to operation, yet often excluded or misallocated.
• Clean-in-Place (CIP) systems: These keep critical plant and channels sanitised without disassembly but can be complex and costly. Generic building cost models may not capture these assets.

4. Cross Contamination Control

Allergy‑sensitive production lines require completely separate equipment, ventilation, partitioning and cleaning regimes to avoid cross‑contamination. This extra equipment can lead to higher costs to replace in the event of total loss but may not be something considered when looking at the building holistically.

5. Leased or Rented Assets

With often high initial capital costs, the leasing or renting of equipment assets is commonplace and typically covers mobile plant, label printers, shrink-wrapping lines, and rented chillers to name just a few.

The insurance implications here are twofold:

• Contractual responsibility for reinstatement: Leased assets might not be automatically included under your property policy, even though replacement post-loss may be your liability.
• Asset visibility: Certain assets may not appear on a company’s fixed asset register or be picked up when a reinstatement review is carried out in-house, but their absence from cover could leave a serious gap in the event of a loss.

6. Mobile Stillages, Containers, Trays & Pallets

Food & beverage sector businesses often manage thousands of mobile items that are essential for operation, but frequently omitted from reinstatement assessments, such as hygiene compliant stillages, ingredient bins, and reusable containers, trays and pallets.

These are typically spread across production, storage and logistics environments, or even offsite at third-party facilities. They may fall into a grey area, making the insurance treatment unclear.

Again, these assets may be leased or rented yet contracts can mean that insurance responsibilities rest with the company on cover.

7. Equipment Mobility & Site-to-Site Variance

Unlike manufacturing industries that are fixed-plant heavy, food and beverage operations often move equipment between production lines or sites. This means that static valuations quickly become outdated unless there’s a clear strategy for tracking and adjusting declared values for equipment moves across facilities, such as the use of asset registers and asset tagging.

8. Food-Grade Equipment & Fixtures

Standard construction rates don’t reflect the higher costs of food-grade compliant equipment and fixtures, such as stainless-steel stairs and handrails, food-safe conveyors and epoxy-sealed containment zones.

Importantly, they may need to be reinstalled by specialist food industry contractors, which could increase costs further.

9. Sprinkler Systems

Many food and beverage properties don’t rely on one sprinkler layer. They may have two. One within insulated dropped ceilings, the other in the roof void above. Freezer areas require specialist dry-pipe systems with custom nozzles designed for extreme low temperatures. These may be much more expensive to reinstate and harder to source post-loss, adding cost and delay.

10. HEPA Filtration & Air Quality Systems

Some food and beverage production environments require HEPA-grade air filtration in HVAC systems, which is well above the specification of standard commercial ventilation. Failing to account for this class of service in reinstatement costings may leave a business with a significant underinsured position.

11. High-Speed Doors as Airlocks

To prevent cross-contamination and maintain hygiene zones, many sites install airlocks using two high-speed shutter doors at each access point. Should they need to be reinstated, they’ll need careful commissioning to meet airflow requirements; another detail that can be easily missed from generic assessments. 

12. Separation of Dry vs Wet Goods Areas

Storage segregation is often a requirement for certification and compliance. But separating dry from wet goods demands additional space, specialist racking, controlled drainage and sometimes distinct HVAC systems.

In reinstatement terms, this means more materials, more infrastructure and more complexity than typical warehouses. Treating a food warehouse facility like a simple base fabricated box with racking would likely understate the true reinstatement position.

13. Pest Control Systems

One unique consideration for this industry is the level of pest control management required. To help meet food safety standards, many facilities need to install permanent pest control fixtures, such as rodent and fly killers, drain covers and bird netting for outdoor areas.

As these often fall somewhere between operational expense and fixed asset, they can be overlooked in reinstatement costs. However, regulators may require these systems to be in place before operations can carry on.

Why Standard Models and Indexing Fall Short for the Food & Beverage Industry

We often warn that indices and modelling tools are blunt instruments when applied across portfolios. They rely on assumptions about capacity, geography, materials, and policy terms – often failing to capture the unique demands of food‑grade environments.

Models typically omit interior fit‑outs as described above. They often under‑estimate soft costs like professional fees or debris removal in asset dense industrial settings.

By not accounting for these unique building features and assets, this can leave food and beverage companies at risk.

Underinsurance means that in the event of a loss, insurers may invoke an average clause that settles a claim proportional to the declared value shortfall. This could result in partial payouts. In Charterfields’ 2025 gap report, 77% of plant, equipment and contents assessments we covered were underinsured with 35% having declared values at less than half of the true reinstatement cost, highlighting the importance of getting this right.

Avoiding Underinsurance in the Food & Beverage Sector: Best Practice Approach 

Reinstatement values in the food and beverage sector can’t be left to guesswork or generic modelling. Here’s how to get it right…

• Sector-specific on-site inspection: Accurately document and capture the true reinstatement costs of specialist features and services.
• Reassess regularly: While reassessments are recommended every three years, food and beverage facilities may need more frequent assessments to track and adjust declared values for change.
• Confirm policy wording: Declared values need regular review to ensure that they match to the definitions set out in a specific policy on buildings, equipment and other assets, avoiding gaps and disputes should a claim arise.
• Include all ‘soft’ costs: Like demolition, debris removal and professional fees. If they aren’t reflected fully in declared values, the policyholder is at risk in the event of a claim.
• Don’t rely solely on indexing: While historic costs are a useful indicator of past expenditure, the application of inflation indices to such figures may not account for changes in currency or tariff fluctuations for assets acquired outside of the United Kingdom, building codes, sector-specific construction inflation or site complexity. In summary, it is always recommended that assumptions are validated using a site inspection and regular review.

Conclusion

Setting reinstatement costs for insurance coverage in the food and beverage sector isn’t just about adding a percentage uplift each year. It means truly understanding how a facility operates, what compliance and hygiene standards are relevant, and achieving clarity concerning the line between buildings and equipment.

If you want confidence that declared values reflect the real cost of reinstating a facility, it pays to work with a valuation specialist who knows your sector inside out.

Get in touch with the team at Charterfields to discuss your food and beverage reinstatement costs and how we can help ensure your buildings and assets are accurately assessed and properly insured.

The post Setting Reinstatement Costs in the Food & Beverage Sector appeared first on Charterfields Limited.

This persistent shortfall leaves businesses dangerously exposed. If a major incident occurred tomorrow, could your operation afford the cost of replacing or repairing critical equipment out of liquid reserves or current cash holdings? For most, the answer is no.

In this article, we tasked our team of surveyors and valuers to draw on their technical skills and practical expertise in this area to uncover what’s causing the ongoing insurance gap for plant and equipment and share real tips on how businesses can mitigate their risk.

Insurance statistics – Plant, equipment & contents 2025

What’s causing the insurance gap in plant and equipment?

There are several key reasons why underinsurance remains a widespread issue in plant and equipment…

Asset churn and upgrades

In fast-paced sectors like manufacturing, logistics and food production, equipment is regularly upgraded, reconfigured or relocated. Insurance statements of values often don’t keep pace.

Outdated or generic estimates

Many businesses rely on historical figures or broad-brush online estimating tools that fail to capture real-world variables like unique equipment, inflation, market scarcity, exchange rate fluctuations or site-specific installation requirements.

Blind spots in risk assessments

Internal valuations often overlook essential factors such as expensed items or leased equipment. They may also fail to recognise that values ought to be based on new rather than second-hand costs, and reflect custom modifications. All of these factors can significantly impact reinstatement costs.

Shifts in regulation

New legislation, industry standards and compliance requirements often mandate modifications, upgrades or additional safety features. If your declared values don’t reflect these, you’re already falling behind.

Supplier pricing volatility

Pricing for plant, equipment, and materials remains volatile. And it doesn’t look like it’s stabilising any time soon, particularly with the recent supply chain disruption driven by global tariff uncertainties. According to the BCIS construction industry forecast, building costs are estimated to rise by 17% over the next 5 years, while tender prices will rise by 15% over the same period. 

Why this matters – Underinsurance examples in plant and equipment

Imagine this: a fire damages your production line. Your current policy, which is based on values set three (or more) years ago, doesn’t come close to covering the cost of replacement. Whether that’s due to inflation, recent equipment upgrades, or a combination of different factors.

Worse, global supply chain delays mean lead times for new machinery have lengthened, bringing your operation to a halt for months or years. Business continuity is out the window, and recovery is both slow and expensive.

This is exactly the kind of real-world scenario we see all too often. For example, back in 2021, the Bridgewood Plastics site in Hull was devastated by a huge fire. While, thankfully, no staff or members of the public were injured, the warehouse roof caved and around 70 homes in the surrounding area had to be evacuated. The company, which had been in operation for over 30 years, sadly failed to bounce back and folded soon after the disastrous blaze. While incidents like this are often unavoidable, ensuring your plant and equipment is adequately covered can help protect your business.

What are the potential consequences of inadequate insurance cover?

We’ve already covered the risks of incorrect declared values as part of our Frequently Asked Questions series, but in terms of plant and equipment, here are some of the consequences inadequate insurance might put you at risk of:

• Partial claim payments: If declared values fall short, insurers apply “average” clauses, reducing your claim payout in proportion to the undervaluation and leaving you out of pocket.
• Delayed recovery: In real-world events, reduced payouts and long equipment lead times can stall operations and throttle revenue.
• Strain on working capital: If your insurance doesn’t cover full replacement or reinstatement costs, the shortfall has to come from somewhere (usually your own reserves or emergency borrowing). That can strain liquidity and force difficult trade-offs elsewhere in your business.
• Business continuity plan breakdown: An outdated valuation undermines the assumptions behind your business continuity plan, leaving you exposed when you most need a strategy for stable recovery.
• Regulatory and contractual risks: In some sectors, failure to reinstate critical machinery within an agreed timeframe can breach contracts.

What can your business do to mitigate the risk?

Here’s how business owners and risk managers can take control:

1. Don’t delay reviewing values

Review your policy and declared values regularly, especially after major investments, upgrades or structural changes. RICS guidelines, as determined after discussions with insurers, suggest that declared values are adjusted annually to reflect the rate of inflation, with a major review every three years.

2. Understand your exposure

Beyond the equipment you own, understanding how external forces could affect your ability to replace plant and equipment is key. Monitor the cost trends of key assets and components, especially if they’re imported or made from materials sensitive to geopolitical or economic changes.

3. Review your continuity plans

A Business Continuity Plan (BCP) is only as good as the assumptions it’s based on. Update your business continuity strategy and business interruption insurance cover regularly to accurately reflect realistic equipment reinstatement periods.

4. Get a professional valuation

Relying on internal estimates or online calculators might not provide the most accurate overview of your assets, especially if your business depends on specialised machinery or complex operational setups. Instead, a valuation from a recognised expert like Charterfields gives you a defensible, auditable basis for your declared values which can strengthen your position with insurers in the event of a claim. 

Partner with the experts in plant and equipment insurance valuations

As Aviva’s official specialist partner for plant and equipment valuations, Charterfields delivers independent reinstatement cost assessments designed to close the insurance gap and reflect the full picture: from specialist machinery and installation to delivery timeframes, compliance standards and site constraints.

Get peace of mind that your assets are accurately valued and properly insured, and reach out to our team today.

The post Plant and Equipment: A Concerning Gap in Insurance Coverage appeared first on Charterfields Limited.

Our recent underinsurance report found that 88% of properties surveyed were underinsured on buildings and civil works, and 35% had declared building values at less than half of the true reinstatement cost. 

Market fluctuations, advancements in technology and over-reliance on computer models for valuations are challenges facing many of our clients. And choosing the right insurance valuation consultant is key to overcoming them. 

Here’s what to look for when selecting the right service provider.

Who should I select as an insurance valuation consultant?

Engaging a skilled consultant with direct and extensive knowledge of insurance is critical. 

While quantity surveyors and building surveyors may have knowledge of current build costs, that doesn’t always translate into understanding the issues or costs that occur in the event of a loss. It’s not just about how much it costs to construct a building from scratch – it’s about what it takes to rebuild after a loss, often under pressure and without the luxury of time.

For example, after a major incident, there may be no opportunity for full-scale procurement processes. Rebuilding quickly to minimise business interruption is key, and that urgency needs to be built into the cost assumptions. A consultant who doesn’t understand this nuance might give you a number that looks right… until you actually need it.

The best consultants don’t just take your numbers and run with them. They validate the information they’re given. If a provider offers to do a desk-based valuation without independent verification, that should ring alarm bells.

What qualifications or certifications should I look for in a valuer?

Accurate insurance valuation assessments require more than just surveying skills. The consultant needs to have a sound understanding of property construction, insurance policy language and regulatory compliance.

Some insurance policies specifically require valuations to be carried out by a member of the Royal Institution of Chartered Surveyors (RICS). The RICS has also issued guidance to its members of the appropriate methodology for insurance assessments. 

However, RICS membership alone isn’t a guarantee. The institution has over 140,000 members conducting a wide range of services – and only a fraction of them are experienced in carrying out insurance assessment work. 

There are also excellent consultants who come from loss adjusting or insurance backgrounds rather than surveying but are perfectly capable of conducting assessments. 

The key is this: does the individual (not just the firm) have direct experience with insurance valuation? Do they understand how insurance clauses affect valuation methodology? Have they worked with loss scenarios before? Have their values been rested?

Ideally, surveyors should individually be well-versed in insurance policies and valuation requirements, as lack of knowledge of the application of insurance can lead to significant discrepancies in estimated reinstatement costs, leaving the policyholder exposed. 

Also make sure the firm is RICS-regulated and carries significant professional indemnity insurance. That signals accountability and financial backing in case something goes wrong.

What follow up support will they provide?

Some valuation firms offer insurance assessments at relatively discounted rates, but they do so because they offer no support after a report is submitted. 

When choosing a supplier, it is important to confirm that they are willing to explain their values, provide breakdowns, discuss inclusions and exclusions and support the client in the event of a loss.

How much does an insurance valuation cost?

This is a difficult question to answer given the huge range of facility types and sizes. 

Fees are typically charged as a fixed fee based on the estimated time expected to complete the work. The fee for a typical small single building location could be hundreds of pounds whereas the fee for a huge manufacturing or process plant site could be in the high tens or even hundreds of thousands.

Ultimately, the cost should reflect the complexity of the asset, the risk involved, and the depth of the consultant’s service, and not just how many square metres are being assessed.

Insurance valuation consultant checklist

To help you evaluate and select the right consultant for insurance valuation assessments, we’ve created this checklist as a guide.

• Insurance specialisation

1. 1. • Does the consultant specialise in insurance reinstatement cost assessments?
      • Are their reports tailored to meet the specific requirements of insurers and brokers?

• Report content & detail

1. 1. • Does the report include for essential insurance-related details such as:
        • Demolition and debris removal costs
        • Presence of hazardous materials like asbestos
        • Potential requirements for shoring up neighboring properties
      • Is the level of detail appropriate (i.e., comprehensive enough for insurers but not overly complex)?

• Alignment with policy terms

1. 1. • Does the assessment align with your specific insurance policy terms?
      • Are assets correctly categorised (e.g., the demarcation between plant and buildings)?
      • Are all relevant assets, including offsite and rented equipment, considered?

• Credibility

1. 1. • Is the consultant’s report recognised and accepted by the insurance market?
      • Do insurers and reinsurers find their assessments credible and reliable?

• Experience and track record

1. 1. • Does the consultant have a proven track record in insurance valuations?
      • Have their assessments been tested and validated through actual insurance claims?

• Methodology and approach

1. 1. • Does the consultant use appropriate methodologies, such as:
        • First-principles elemental costing
        • Analytical models based on extensive experience
      • Are they transparent about the assumptions and data sources used?

• Regulatory compliance and qualifications

1. 1. • Is the firm regulated by a recognized professional body (e.g., RICS)?
      • Do they carry adequate professional indemnity insurance?
      • Are the individual assessors qualified and experienced in insurance valuations?

• Post-assessment support

1. • Does the consultant offer support after delivering the report?
   • Are they available to explain values, provide breakdowns, and assist during claims?

Using this checklist can help you engage a consultant who provides accurate, reliable, and insurer-accepted valuations, thereby safeguarding your assets and ensuring appropriate insurance coverage.

For more information, download your copy of our free eBook to find out who is best placed to advise you on declared values.

Conclusion

Choosing the right consultant for insurance valuation is a critical step in protecting your assets and ensuring your insurance cover is fit for purpose. The right consultant will bring a deep understanding of both construction and insurance, apply proven methodologies, validate the information provided, and stand behind their work long after the report is delivered.

At Charterfields, we specialise in insurance valuation for businesses throughout the UK and have been a trusted service provider for over 30 years.  

For a copy of Charterfields’ 2025 Underinsurance report, or for support with your insurance valuation, get in touch with our team. Or come visit our stand at Airmic 2025 in Liverpool.

You’ll find more information to your frequently asked questions about insurance valuation throughout our FAQ series:

• Key considerations when assessing reinstatement costs for insurance
• Everything you need to know about insurance valuation methods
• What are the implications of incorrect declared values in insurance?
• What are the risks of incorrect declared values?
• What to expect from an insurance valuation report

The post How to Choose the Right Insurance Valuation Consultant appeared first on Charterfields Limited.

As part of our ongoing series, we are addressing some of the most frequently asked questions we receive around reinstatement assessments.

In this article, we explore why accurate assessments are essential, particularly in the context of meeting legal and contractual obligations.

What is a reinstatement cost assessment?

A reinstatement cost assessment (RCA) is an independent assessment of how much it would cost to rebuild or replace your property or business assets if they were destroyed by an insured event. In reflecting the total reinstatement position this ensures adequate cover exists to cover partial losses that are more common.

Unlike a market valuation, reinstatement cost takes into account current construction and asset replacement costs, professional fees and any specific requirements linked to the property, to match with your insurance policy terms. Here’s how reinstatement costs are calculated.

Are there any regulatory requirements for insuring certain assets?

There is no legal requirement compelling businesses to carry out a reinstatement cost assessment. However, there may still be rules and obligations businesses must follow as set out in separate contracts. Often, bank, mortgage or secured lending agreements will include a proviso that requires a property or assets to be insured for full reinstatement cost. If you don’t meet those terms, you could find yourself in breach of contract.

Insurers may also set as a condition of cover that regular reinstatement cost assessments, especially for certain types of assessments, are undertaken. For example, listed buildings, listed buildings, or specialist commercial properties often need careful assessment.

So, while the law itself may not demand a reinstatement cost assessment, many contracts and insurance policies rely on or will expect one. 

Having an accurate, professional assessment in place can help protect you from the risk of underinsurance.

How does an assessment impact my compliance with insurance requirements?

An accurate, up-to-date assessment plays a key role in showing that you’ve taken reasonable steps to ensure that your declared values for property or assets are correct. It’s a simple but important part of meeting your obligations under the required duty of transparency to provide material facts to insurers and, therefore, protect your business.

If something goes wrong — whether it’s a fire or flood leading to loss or serious damage — insurers, lenders or stakeholders may want to see evidence that you’ve done everything possible to declare values that were appropriate for the insured assets.

Having a reinstatement cost assessment in place demonstrates that you’ve met those expectations and helps avoid disputes about whether cover was adequate.

What could happen if my business is underinsured?

Underinsurance is one of the biggest risks businesses face when cover levels are not up to date or accurate. Charterfields produce an annual ‘insurance gap’ report and we consistently find that nearly 80% of all business locations we inspect are underinsured to some degree. 

If your property or assets are insured for less than it would actually cost to reinstate, you could end up facing a significant shortfall in a claim event.

Most insurance policies include an ‘Average Clause’ which means that if you are underinsured, any claim settlement will be reduced in proportion to the shortfall. For example, if your property is insured for only 75% of the true reinstatement cost, an insurer may only pay out 75% of any claim, even if that claim is for partial damage.

This mechanism protects an insurer, given that the full premium has not been received and adequate cover has not been in place.

That outcome could leave you with a significant gap to cover, and in some cases, this could affect a business’s ability to recover and continue trading.

Could underinsurance have legal consequences?

In most cases, the immediate consequence of underinsurance is financial, however, contracts that are linked to a business having adequate protections in place could trigger legal implications. For example, commercial lenders often require adequate insurance cover as part of their lending terms. If your reinstatement cost assessment is out of date or inaccurate, and the insurance falls short, lenders may take legal steps to recover their losses. 

There are also risks for directors, who may have a fiduciary duty to ensure property is properly insured. If they fail to do so, and there is a shortfall, there is the potential that they could be held liable. 

The same goes for property managers. If they are responsible for arranging insurance and don’t make sure cover is adequate, they could face censure from property owners or other stakeholders.

What happens if an insurer challenges an assessment?

While uncommon, an insurer may question the outcome of a reinstatement cost assessment.

Ensuring that an assessment is carried out by experienced, qualified surveyors, like our team at Charterfields, means that challenges of this nature are rare.

Valuation specialists work closely with brokers and insurers, using proven methodologies and clear reporting to make sure the figures they provide stand up to scrutiny. If an insurer does have questions, it’s usually around what has been included or excluded from the assessment instead of the calculation itself.

How often should I get a reinstatement cost assessment?

There’s no strict rule about how often you need an assessment, but it is recommended that businesses get independent advice on reinstatement costs every three years. Some insurers may require more frequent assessments, particularly for certain types of property and this is prudent for complex facilities where costs can change rapidly. 

You should also arrange a new assessment if there have been significant change to a property. For example, if it has been extended, refurbished or altered, or if construction costs in your area have noticeably increased.

Avoiding the risks 

To avoid financial and legal risks, keeping your reinstatement cost assessments accurate and up to date is a must. This checklist covers best practice:

• Review your reinstatement cost assessment regularly

Industry best practice is to rebase your valuation every three years.

• Use qualified, experienced surveyors

Always use RICS qualified professionals to carry out your reinstatement cost assessment.

• Understand your contractual and legal obligations

Check the terms of any mortgage, lease agreement or insurance policy to make sure you’re meeting their requirements.

• Keep your insurance cover up to date

Once you’ve had a reinstatement cost assessment carried out, make sure it is updated regularly.

• Maintain clear communication and records

Make sure you always keep a clear record of assessments, valuations and insurance updates, and communicate any significant changes to your broker, insurer and, importantly, your advising surveyor.

Final thoughts

If your insurance cover isn’t enough, or if you’re not meeting stated obligations, it can lead to serious financial problems, and even legal issues. Having a clear, professional valuation in place ensures an individual or organistion is in a stronger position to deal with any issues in

a claim event.

Talk to Charterfields today

If you’re unsure whether your current valuation is accurate or if it’s time for an update, Charterfields can help. Our team of experienced surveyors and valuers can carry out a clear, independent reinstatement cost assessment tailored to your property or assets.

Speak with us today to arrange an assessment and make sure your business is adequately insured.

Our clients’ FAQs, answered

We’ve been answering your frequently asked questions spanning the entire insurance valuation lifecycle in this series of articles. Find the answers you’re looking for here:

• 9 key considerations when assessing reinstatement costs for insurance
• Everything you need to know about insurance valuation methods
• What are the implications of incorrect declared values in insurance?
• What to expect from an insurance valuation report

Get in touch with our team for the results of our 2025 Underinsurance Report, or follow us on LinkedIn to stay updated with more expert insights and answers to your insurance valuation questions. 

The post What Are the Risks of Incorrect Declared Values? appeared first on Charterfields Limited.

Understanding current reinstatement costs is key to ensuring adequate insurance coverage and avoiding financial risks. Our team specialises in providing businesses around the world with comprehensive insurance assessment reports to help clients make informed decisions.

With extensive experience in reinstatement cost assessments, as well as financial valuations, we help businesses and stakeholders across various sectors manage risks effectively. Read on to find out exactly what to expect from an insurance valuation or reinstatement cost assessment report.

What is an insurance valuation report?

Also known as a reinstatement cost assessment, an insurance valuation report provides a professional assessment of the cost required to reinstate or replace an asset or facility in the event of total loss. 

These reports ensure that your business’s property damage insurance coverage aligns accurately with the property’s reinstatement value, preventing under insurance or wasted premiums due to over insurance.

Why might I need an insurance valuation report?

Insurance valuation reports are essential for helping businesses and property owners to achieve the following:

• Ensure adequate coverage of assets
• Avoid financial risks associated with underinsurance
• Assess reinstatement costs across separate locations, buildings and assets
• Provide insurers with independent confirmation of declared values
• Appropriately allocate values to match with policy terms
• Support insurance claims with clear documentation

What does an insurance valuation report include?

A comprehensive insurance valuation report will typically include: 

• A commentary on the general nature of the assets assessed 
• A statement of the basis adopted and the date of assessment 
• Information about the nature and source of any information relied upon
• Commentary on the extent of inspection, assumptions and restrictions
• A methodology statement covering the approach
• An opinion of assessment, with appropriate analysis by location
• The allowances made for the estimated costs of professional fees, demolition and debris removal
• Provision for VAT, if applicable
• A statement of the estimated maximum period of reinstatement in the event of a total loss occurring, and 
• A location map or plan

Where contents are assessed, and if agreed during the proposal stage, a report can also include an inventory of the major assets to assist with asset management and maintaining accurate declared values in the future.

What information do I need to provide to the surveyor for the report?

To facilitate an accurate assessment, the surveyor will typically require site and building plans so that they can determine the extent of the assets to be considered. Most professional surveyors will validate this information since ‘as built’ measurements can regularly differ from plans held by clients.

For contents assessments, a copy of the financial fixed asset register is helpful. For more complex locations equipment lists, P&ID documents, schematics and details on major process equipment are useful.

Cost data for any construction projects completed in the past three years and information covering future planned capital building/equipment projects may also be helpful.

Recent asbestos surveys, which confirm the location of any asbestos containing materials, is also useful since this could have an impact on expected demolition and debris removal costs. 

If you’re not sure what information to share ahead of the insurance valuation report, our team is more than happy to help ensure you’re as prepared as possible so no stone is left unturned – and the risk of unexpected costs is kept to a minimum.

How long does the assessment process take?

The length of time it takes to complete an insurance valuation assessment depends on the size and location of the facilities being evaluated. Typically, this process takes between 6 and 12 weeks from the initial inquiry to the final report submission.

How do you prepare the report?

Our expert surveyors follow a structured methodology to prepare the report:

1. Initial consultation – Understanding your requirements and gathering preliminary data
2. Site inspection – If a site inspection is required, conducting a thorough physical inspection and verifying data provided
3. Data analysis – Reviewing collected information and applying valuation methodologies
4. Report compilation – Documenting findings and producing a detailed valuation report.
5. Final review & submission – Ensuring accuracy and clarity before delivering your final report.

How often should I update my insurance valuation report?

It is recommended to update your valuation every three to five years, or sooner depending on any significant changes to your assets. Changes might include construction cost inflation, renovations, expansions or changes in regulations. For plant and equipment, physical movement of assets can quickly change values between sites or buildings. These factors can all impact reinstatement costs, making periodic updates essential for ensuring your coverage remains accurate.

Does an insurance valuation report include depreciation?

No, an insurance valuation report does not include depreciation. Unlike market valuations, which may factor in depreciation, insurance valuations focus only on the cost to reinstate or replace an asset at current prices. The goal is to ensure that policyholders have sufficient coverage to rebuild or restore their property without financial shortfalls.

Are there specific industry regulations or guidelines I need to follow?

Yes, insurance valuations can be impacted by industry-specific regulations and guidelines, for example current building codes. Compliance requirements vary depending on factors such as asset type, sector, and location. 

Here are some of the key regulations and guidelines that can impact reinstatement costs and hence UK insurance valuations:

• The Building Regulations 2010, which governs construction and renovation standards to ensure safety and energy efficiency
• The Regulatory Reform (Fire Safety) Order 2005, which sets out fire safety responsibilities for businesses and property owners
• The Control of Asbestos Regulations 2012, requiring asbestos management plans which can impact demolition and reinstatement costs.
• The Construction Design and Management (CDM) Regulations 2015, which establishes duties for safe construction and maintenance planning. 
• Building Safety Act 2022, which is designed to improve the design, construction, and management of higher-risk buildings, focusing on structural and fire safety risks. 

Our surveyors at Charterfields ensure that valuations address the latest industry standards and best practices.

Insurance valuation vs market valuation – what’s the difference?

Understanding the difference between values used for insurance and market value is key to getting your declared values correct. Most insurance policies are written on a reinstatement basis, meaning that declared values should represent the cost on a ‘new for old’ basis, of reinstating the assets like for like.

Market valuations represent what an asset would transfer in a sale, and takes into consideration factors like location, demand, and potential income generation, and the land on which the property sits. This may have no bearing on insurable values, for example a historic textile mill may cost tens of millions to rebuild but may have a much lower market value due to its location, configuration, high maintenance costs, etc. Alternatively high end residential tower blocks in London may transact at a multiple of their reinstatement cost. 

Can I use the insurance valuation report for other purposes?

As mentioned above, insurance valuations are not the same as market valuations, and the inclusions and exclusions can differ from valuations required for other purposes. Accordingly, these reports are specific to insurance placement.

That said, the the gathered data can have additional benefits for clients including:

• Verifying building details and asset documentation.
• Providing photographic records for reference.
• Supporting asset management and financial reconciliation.

These insights can prove valuable for broader business planning and operational efficiency.

For more details please get in contact

At Charterfields, we provide clear, accurate and comprehensive valuation reports to support owners, risk managers, insurance brokers, insurers and reinsurers in managing their assets effectively. If you have further questions or need an insurance valuation assessment, get in touch with our team and we’ll be happy to help.

You’ll find more information to your frequently asked questions about insurance valuations throughout our FAQ series:

• Key considerations when assessing reinstatement costs for insurance
• Everything you need to know about insurance valuation methods
• What are the implications of incorrect declared values in insurance?
• What are the risks of incorrect declared values?

The post What to Expect from an Insurance Valuation Report appeared first on Charterfields Limited.

The declared value represents the cost to reinstate the property at the beginning of the policy period, excluding future inflation. Insurers use this figure, alongside the sum insured (SI) – which includes an allowance for projected inflation – to determine coverage levels and premiums.

Failing to declare the correct value can expose your business to the risks of over or under insurance and leave you vulnerable to significant financial and legal consequences, affecting both the policyholder and any third parties involved. Understanding these risks is crucial to ensuring adequate protection and compliance with insurance requirements.

As part of our Q&A series, our expert team has already shared top tips and advice on insurance valuation methods and key considerations for assessing reinstatement costs. In this article, we’ll answer our clients’ most common questions on the implications of incorrect declared values in insurance.

Declared values vs sum insured: what’s the difference? 

What are declared values (DV) in insurance? 

This is the value that policyholders report to their insurers as the current value at risk, typically determined by an independent valuation. It may be referred to as ‘Day One Reinstatement’, indicating the costs are as at the first day of the policy, excluding future inflation. 

Some key considerations here are that most policies are on a reinstatement basis, essentially ‘new for old’, so declared values ought to represent the current cost to rebuild or replace the existing property to the nearest modern equivalent, including allowances for any changes to building regulations and other legislation.

What is sum insured (SI)?

This term refers to the declared value plus an additional allowance to reflect the impact of inflation, during the policy term and the reinstatement period, ensuring adequate coverage. Essentially, it’s the maximum amount an insurer will pay in the event of a total loss. 

Insurers may adjust the inflationary allowance based on factors such as the complexity of the property and projected cost changes. We recommend consulting your insurance broker, who can help clarify how this calculation is handled.

Do I need to include demolition costs?

Yes, declared values should include the estimated costs of demolition and debris removal. This may need to include for the costs of shoring up adjoining properties, and for the licenced removal of asbestos or other contaminants that may be present.

What happens if your declared values are incorrect? 

Overstating or understating your declared values comes with significant risks. Here’s what may happen in these instances.

The risks of overstating declared value

If the declared value is higher than the property’s actual reinstatement cost, the policyholder might pay unnecessarily high premiums without receiving additional protection. 

In cases where third parties are involved, those responsible for arranging the insurance could face liability claims for incurring unnecessary costs.

The risks of understating declared value

An understated declared value can lead to underinsurance, exposing the policyholder to financial shortfalls in the event of a claim. 

Additionally, directors responsible for insurance arrangements could face legal consequences if shareholders or related parties hold them accountable for negligence. 

In extreme cases, insurers may consider an understated value as a misrepresentation, potentially voiding the policy and leaving the policyholder without coverage.

How do declared values affect premiums?

Insurance premiums are typically calculated as a percentage of the declared value or sum insured. While adjustments to declared values are common following an insurance assessment and may lead to premium changes, these do not always increase proportionally. 

Insurers may modify their rates based on risk management measures in place, the reliability of the valuation and the policyholder’s claims history. A thorough and up-to-date insurance valuation can instil confidence in insurers, potentially resulting in lower rates.  

How do insurers reference declared values in claims?

In the event of a claim, especially for significant losses, insurers will typically review the declared value. If it is found to be too low, the insurer may apply the “average clause,” leading to reduced payouts. In the worst-case scenario, if an insurer determines that the declared value was deliberately understated, they may deny the claim altogether.

A recent independent assessment by a reputable firm can provide assurance on the declared values to insurers and their loss adjusters, demonstrating that the declared values are accurate and reducing the risk of disputes.

What steps can you take to ensure accurate declared values?

1. Obtain professional advice on values – Regular independent reinstatement cost assessments ensure that your declared values remain accurate and aligned with current market conditions. Getting expert support with your valuations means that complex property such as heritage buildings, healthcare facilities, process plants, food facilities and aviation properties are fully covered in the event of a claim.
2. Review your policy regularly – To make sure that your declared value and sum insured are updated to reflect inflation and changes in property reinstatement costs.
3. Keep documentation – Maintain records of historic costs, valuations, policy renewals and any correspondence with insurers to support your declared values in the event of a claim. Maintaining a schedule of your current assets means you will have access to the details required by insurers quickly in the event of a claim.

What happens if your declared value is challenged?

If an insurer challenges your declared value, they may conduct their own valuation or appoint a loss adjuster to reassess the reinstatement cost. If they find discrepancies in your policy, you may be subject to reduced payouts or policy adjustments. 

Having a recent independent valuation can serve as strong evidence to counter disputes and secure a fair claims settlement.

Book an independent valuation today

Accurate declared values for your property and assets are key to securing appropriate insurance coverage – and avoiding the financial and legal risks associated with over or under insurance. 

Regular independent valuations and consultations with insurance brokers can help policyholders avoid costly mistakes and ensure adequate protection. At Charterfields, we specialise in independent insurance valuations, helping clients in a range of sectors establish accurate declared values and secure the right insurance coverage for their needs.

Ready to put your mind at ease with a thorough, independent insurance valuation? Access expert advice on declared values and insurance assessments by getting in touch with our team. 

Read more from our FAQ series:

• 9 key considerations when assessing reinstatement costs for insurance
• Everything you need to know about insurance valuation methods
• What to expect from an insurance valuation report
• What are the risks of incorrect declared values?

The post What are the implications of incorrect declared values in insurance? appeared first on Charterfields Limited.

At Charterfields, our team has decades of experience providing reliable insurance valuations to businesses worldwide. Below are the most common questions we get asked about insurance valuation methods.

What method is used for property, plant and machinery insurance assessments?

For property, plant, and machinery insurance, most property damage policies are ‘written’ on a reinstatement cost basis. Reinstatement costs represent the amount required to rebuild, repair or replace the damaged or destroyed assets with new items of similar value including allowances for professional fees and demolition and debris removal, taking into account all the factors that could influence these costs. 

Occasionally assets may be insured on alternative bases, for example actual cash value or indemnity value, but reinstatement is the most common valuation method.

How is the ‘reinstatement cost’ calculated?

To determine the reinstatement cost of buildings and civil works, a surveyor will typically conduct the following:

• Confirmation of areas: Surveyors calculate the gross floor area according to standard property measurement guidelines, which may differ from other valuation approaches or measurement standards (such as financial or property sales assessments).
• Assessment of Costs: Surveyors will assess rebuild costs taking into consideration recent costs for similar buildings, tender prices, material costs, labour rates and other factors.
• Component analysis: The building’s structural and aesthetic elements are analysed, including internal and external features. The surveyor reflects elements that may differ from average costs based on experience with similar structures, accounting for differences in materials, construction type and other building-specific features, e.g. heritage properties.
• Local adjustment factors: Local labour rates, regional material costs and site conditions (e.g. access and location challenges) are all factored in. As are conditions unique to the building’s location, such as topography and proximity to adjacent properties.

To determine the reinstatement cost of plant, equipment and contents, a surveyor will often conduct the following:

• Documentation of assets: Key assets are documented individually, while smaller items are grouped and assessed area by area.
• Cost analysis: Costs are based on databases of similar assets and discussions with suppliers, including production and origin details.
• Reflection of Foreign Exchange: Unlike property, currency exchange rates and trade tariffs can have a fundamental impact on reinstatement costs for contents and can vary significantly year-to-year.
• Local adjustment factors: Again local labour rates, regional material costs and site conditions that could impact installation costs (e.g. access and location challenges) are factored in.

For both property reinstatement costs and plant, equipment and contents reinstatement costs, surveyors include allowances for fees, demolition and debris removal. Professional fees can vary by region and asset types so need to be adjusted to the subject assets.

Do I need to include VAT in my Declared Values?

Value Added Tax can be complex and its inclusion in your declared values depends on specific circumstances. It’s important to determine the correct level of inclusion or exclusion within the overall declared value, as an inaccuracy could contribute to under-insurance, over-insurance or unnecessarily high premiums being paid.  

As part of our service, our team would consult with your finance department, or tax consultants, to confirm the correct approach.

How are multiple buildings treated?

For businesses whose portfolios have multiple buildings or cost centres, reports would usually show separate values for each building, helping with budgeting and managing insurance across different properties.

Figures can also be broken down between buildings, civil works, contents and IT equipment to ensure that they match to individual policy wording.

Can reinstatement cost assessments be done without a visit?

Desktop assessments can sometimes be a reasonable approach for standard assets, but we always recommend on-site surveys since these are likely to yield more accurate declared values, reducing the risk of under- or overvaluation. Here are some of the challenges you can face when using computer models to estimate reinstatement costs.

Site inspections provide a clearer understanding of a property’s specifics, including finishes and internal features that desktop models may miss. A site inspection can also often identify issues that may not be apparent from plans and documentation.

For large portfolios, surveyors might inspect a sample of locations and estimate values for the rest. However, the accuracy of this method depends on the quality of the data available.

Can I insure for a modern substitute for an older building?

You may decide that you would replace a brick building with a modern steel alternative if the original building is lost, and set declared values on that basis, but what happens in a partial loss situation. In practice insurers expect the declared value to represent a building’s original size, construction and materials. 

Listed buildings may also require like-for-like reinstatement due to their heritage value and the regulatory environment covering reinstatement. 

Failure to insure appropriately can leave a policyholder vulnerable. 

What happens if assets change after an appraisal?

Leading insurance assessment firms offer an annual review option to clients where they will review capital expenditure and adjust reported figures for a set number of years after an appraisal. This can be an effective way of keeping declared values updated over the period after a full inspection-led appraisal. 

If there have been substantial new construction, new locations added, or purchase/movement of contents assets, we would usually recommend a reinspection and update of the original assessment.

Get in touch for an insurance valuation

Regular, accurate insurance valuations are essential to protect businesses that have fixed assets from financial risk. Whether you’re an insurance broker, risk manager or insurer, our experienced team is here to help. We provide detailed assessments tailored to your needs.

Get in touch with Charterfields today if you have any questions on valuation methods, reinstatement cost assessments or if you would like a no-obligation proposal.

Follow us on LinkedIn to stay updated with more expert insights and answers to your insurance valuation questions. Don’t miss the next post in our FAQ series, where we’ll be answering questions on insurance coverage implications.

Read more:

• 9 key considerations when assessing reinstatement costs for insurance
• What are the implications of incorrect declared values in insurance?
• What to expect from an insurance valuation report
• What are the risks of incorrect declared values?

The post Everything you need to know about insurance valuation methods appeared first on Charterfields Limited.