Declared value for insurance purposes answers a different question – “What would it cost, at the start of the policy period, to reinstate or replace the insured property following a major or total loss, on the basis required by the policy?”. On a conventional UK Day One reinstatement basis, it is the inception-date reinstatement cost before future inflation, including the rebuilding/replacement cost and the policy-relevant associated costs such as demolition, debris removal and professional/statutory fees. It is an insurance cost assessment, not a sale valuation.

The word “value” is potentially misleading: market value is an exchange-price concept; declared value is ordinarily a cost-to-reinstate or replace concept used to establish insurance cover. There is no reliable percentage relationship between them and either can exceed the other.

• Market value: Hypothetical transaction price at the valuation date.
• Declared value: Day One reinstatement or replacement cost at policy inception, before future inflation.
• Policy sum insured: Usually the declared value plus the policy’s inflation provision, subject to the actual wording.

Market value vs declared value: direct comparison

The RICS building standard expressly states that a declared value has no direct relationship with a property’s market value. It also requires the assessor to clarify whether the instruction is a building RCA rather than a Red Book market valuation, and to identify what the policy treats as “buildings”, including tenant improvements, fixtures, services and external works.

1. Market value: the transaction concept

RICS defines market value as:

“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

The premise is a market exchange, not recovery following an insured loss. The amount reflects factors that market participants would recognise, including tenure, location, demand, alternative-use potential, income generation, condition and obsolescence. It excludes special value available only to a particular purchaser and represents the asset’s highest and best use where legally permissible, physically possible and financially feasible.

For plant and machinery, the transaction premise must be particularly clear. The market result can differ materially depending on whether the subject is an individual machine, an integrated operational facility, an in-situ asset, or equipment assumed to be disconnected and removed. Asset grouping, availability of associated assets and assumptions therefore need to be explicitly stated rather than silently transferred from an insurance assessment.

2. Declared value: the insurance cost concept

For buildings, the current RICS professional standard defines the usual requirement as a Day One reinstatement figure known as the declared value. It should represent a fixed-price, lump-sum competitive tender for work commencing on the first day of the policy, together with appropriate demolition, associated-cost, professional and statutory-fee allowances.

A building assessment will normally consider:

• rebuilding the existing building, including basements, foundations and retaining walls
• landlord’s alterations, fixtures and fittings
• necessary modifications to comply with current statutory requirements
• relevant drainage, utilities, boundary structures, outbuildings and external works
• demolition, site clearance, debris removal and abnormal access or hazardous-material implications
• professional, planning, Building Regulations and other statutory fees, and
• VAT where it is non-recoverable or otherwise required by the policy.

Declared value is not always identical to “replacement cost” as a bare construction figure. Replacement or rebuilding cost is usually the core cost; the declared value is the policy-facing figure after adding the associated components required by the wording. 

Conversely, some costs—land acquisition, financing, loss of rent, business interruption, contamination remediation, claim-preparation fees or separately insured assets—may be outside the property declared value unless expressly included.

3. Day One structure

Under the usual Day One mechanism:

Declared value = reinstatement cost at policy inception, with no future inflation allowance.

Inflation provision = percentage uplift intended to cover cost escalation during:

• the remaining policy year; and
• the redesign, consent, procurement and reconstruction period.

Policy sum insured or limit = declared value plus that inflation provision, subject to the precise wording and schedule.

Importantly, some policies index the declared value, some index the sum insured, some apply indexation only after loss, and some use a single inflation-inclusive sum insured rather than a conventional Day One structure. The schedule and wording must therefore be checked rather than assuming that all policies operate identically.

A common Day One average condition compares the declared value with the correct inception-date reinstatement cost, rather than comparing the inflation-uplifted sum insured with the Day One cost. The insurer’s maximum overall liability normally remains the stated sum insured. This is typical, but the actual test and any tolerance must be taken from the individual wording.

4. Consequences of using market value

Using market value as the declared value can cause either:

• underinsurance, where rebuilding or replacement cost exceeds market value; or
• overinsurance and unnecessary premium, where a high land/location-driven market value exceeds the insurable reinstatement exposure.

Zurich expressly advises that market value should not be used for building insurance because it may produce either outcome. AXA similarly warns against using purchase price or perceived market value and states that the sum insured should instead reflect rebuilding or replacement cost.

Where a policy contains an average condition, a partial claim may be reduced in the same proportion as the underinsurance. AXA illustrates the typical calculation: if property is insured for 50% of its correct rebuilding value, a £10,000 repair claim may be reduced to £5,000. For a total loss, settlement may also be capped at the sum insured.

However, average is wording-dependent, not a universal unqualified rule. Some policies apply Day One average by reference to the declared value; others use an 85% or other condition, index-linking arrangement, waiver, margin or alternative remedy. The Financial Ombudsman also considers what information was requested, how clearly the implications were explained and how the insurer or broker treated the customer, particularly in consumer and small-business disputes.

5. Buildings versus plant, machinery and contents

Buildings

The building figure is generally based on reconstruction of the physical property rather than acquisition of another existing property. 

Current statutory compliance, foundations, building services, external works, complex demolition, adjacent-property constraints and listed/conservation requirements can make reinstatement cost very different from both historic construction cost and market value.

Plant and machinery

For replacement-as-new cover, the appropriate starting point is normally the cost of obtaining a new identical or suitable modern equivalent, plus relevant:

• freight, duties and exchange-rate exposure;
• installation, foundations and dedicated civil works;
• connections to power, gas, water, drainage or process services;
• commissioning and testing;
• consultants’ fees; and
• dismantling or debris-removal costs where insured.

Age-based depreciation should not automatically be imported from accounts or a market valuation. AXA’s example is a second-hand machine bought for £3,000 but costing £25,000 new: under replacement-cost cover, the relevant insurance amount is £25,000. Different reasoning applies if the policy expressly settles on indemnity, second-hand value or actual cash value.

Contents

The completeness of the population is often as important as unit cost. Contents may extend from major equipment to furniture, IT hardware, tools and low-value items in aggregate, but definitions, sub-limits and exclusions vary. 

Stock, vehicles, money, software/data, tenants’ property and third-party assets may be treated separately, so report categories should reconcile directly with the policy definitions and schedule.

6. Concise illustrative example

Assumptions only — not a universal rate or valuation:

An owner-occupied industrial property has an assessed market value of £2.4m, reflecting its land, location, existing building, demand and transaction circumstances.

Its insurance assessment is:

Assume VAT is fully recoverable and therefore excluded, and the policy applies a 20% inflation provision. The illustrative policy sum insured would be:

£4,456,250 × 1.20 = £5,347,500.

If the insured incorrectly declared the £2.4m market value, it would represent only about 53.9% of the correct Day One declared value. Under a straightforward proportional-average clause, a valid £600,000 partial-damage claim could consequently be reduced to approximately £323,000, leaving a shortfall of approximately £277,000, before considering the deductible or other policy limitations.

The reverse can also occur: a modest building on a highly valuable redevelopment site may have a market value well above its rebuilding cost because market value captures land and alternative-use potential, whereas the buildings declared value is concerned with reinstating the insured physical assets.

Practical takeaways

• Check the purpose of any report. 

A building RCA or declared value is not the same as market value.

• Check the exact policy basis. 

Confirm Day One, replacement-as-new, indemnity, ACV or another settlement basis.

• Confirm the scope and inclusions. 

Verify buildings, landlord/tenant fixtures, plant, contents, externals, third-party assets and exclusions.

• Are associated costs shown separately? 

Rebuild/replacement, demolition/debris, fees, statutory compliance and VAT treatment should be transparent.

• Separate declared value from sum insured. 

Confirm whether inflation is excluded from the reported figure and who determines the uplift.

• Does the report include the reinstatement period? 

This can materially inform the inflation provision and also be useful when determining appropriate coverage for business interruption.

• Avoid accounting shortcuts. 

Historic cost, book value, purchase price and market value are not substitutes for a policy-aligned insurance assessment.

• Check that insurance policy definitions, average conditions, VAT and inflation treatment align with the report.

For more details, get in touch with Charterfields

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.

The post Market Value vs Declared Value for Insurance Purposes appeared first on Charterfields Limited.

In the current economic climate, geopolitical tensions, volatile markets, shifting trade tariffs, and new environmental regulations have created a highly complex landscape for insurance valuations. These aspects have driven general inflation for commodities across the globe, making many businesses assume that they can just adjust their building’s insurance policy to match this (consumer) inflation rate. 

However, this is a common misunderstanding, and can lead to dangerous insurance gaps, which could be catastrophic in the face of a significant loss. 

To ensure your business remains fully protected in the face of cost changes, it’s essential to understand what is driving the inflation of rebuild and reinstatement costs, and how it differs from general inflation figures. In this article, we will unpack these drivers of construction inflation and discuss how you can accurately estimate reinstatement costs to avoid underinsurance. 

Consumer inflation vs construction inflation 

People often see inflation rates discussed in headlines and assume this applies to everything that can be purchased, from the cost of milk, bread, and household energy bills, to rebuilding a commercial property when there is a total loss. However, this is not the case. 

Financial headlines reporting on inflation surges most often refers exclusively to consumer-facing metrics and have no bearing on business properties. General economic trends rarely reflect the complex realities of the construction sector. 

The Consumer Prices Index (CPI) is typically what the headlines are referring to. This index tracks the changing cost of the everyday goods a typical household may purchase. 

While the CPI gives a helpful snapshot of the state of the economy and how much general prices are increasing, it does not correlate with what it costs to reinstate a commercial building after a loss. Rebuilding a factory, warehouse, or office building depends on heavy structural materials, specialist labour, plant machinery hire, and commercial site clearance rather than consumer retail trends. 

When consumer inflation reduces, for example when energy costs come down, the cost of structural materials or specialised installation services may still be at a high cost due to supply chain pressures that are separate from the retail economy. 

Using the correct index 

When it comes to professional valuation consultants carrying out Reinstatement Cost Assessments (RCAs), they do not rely on standard economic inflation figures, because they are often not relevant statistics for an accurate reinstatement value. One source of more relevant data is the Building Cost Information Service (BCIS) which provides specific cost indices for construction costs. 

The BCIS tracks data across the UK construction sector and provides data determined from: 

• Material price indices
• Fluctuations in specialised trade wages and heavy machinery rental 
• The actual prices contractors are bidding to undertake building work in current market conditions 

For example, the BCIS reported findings that the cost of construction materials increased by 5.9% in the 12 months to July 2026, compared to a UK CPI figure of 2.9% over the same period. 

However, any index needs consideration in the context of a company’s specific assets and situation. For example, the underlying data in a BCIS index may be based on large scale national contract inflation which may not be applicable to a remote, listed or specialised facility.

By analysing information and indices from sources such as the BCIS, rather than the general CPI, valuation experts are able to ensure that a property’s declared value reflects what contractors would actually charge for labour and materials. This aims to protect businesses from dangerous insurance gaps. 

This valuable data informs insurance valuations and ensures that they are as accurate as they can be to keep businesses adequately protected. 

What factors are driving up construction and reinstatement costs?

To understand rebuild inflation, it’s important to look at the events that impact construction costs across the globe.

Global oil prices 

The construction sector is reliant on fossil fuels to keep heavy machinery running on-site. Geopolitical instability, such as the current ongoing conflicts across the Middle East, causes a ripple effect on the global market. This is felt on those building sites, for example with escalating diesel supply and prices, thus impacting reinstatement times and costs. 

When global oil prices spike, manufacturers have no choice but to try to pass these increased production costs on, ultimately increasing the final rebuild cost of the property, which the business must pay. 

With the general time between insurance valuations being three years, assessments taken out in 2023 will not reflect this recent spike in costs, leaving those businesses with dated values at risk of being significantly underinsured if their building needs to be reinstated. 

On the other hand, securing a valuation today and keeping it in place over the next few years, assuming oil prices go back to longer term levels again could cause issues – in the event of a loss, the business might find itself overinsured and having paid unnecessarily high premiums.

Material changes

Another factor that can impact overall construction costs is material prices being influenced by international trade rules. A clear example of this is steel. In 2026, 70% of steel used in the UK is imported, with the cost of fabricated structural steel seeing a 17.7% year-on-year increase.

The UK implemented a steel trade measure on UK’s steel trade measure from 1 July 2026 that cuts tariff-free import quotas by 51% to 60% and imposes a 50% duty on out-of-quota imports. This will have an effect on the steel supply chain. The sudden fluctuation in price may leave insurance valuations from even a year ago to be critically short of what is required to purchase the necessary steel framework for a rebuild. 

Similarly, with imported steel facing higher prices, some companies may choose to use cheaper steel alternatives in order to get the rebuild job done to budget. However, this lower price often coincides with lower quality steel that may need to be replaced in years to come, potentially causing higher expenditure for the business in the long run. 

Site clearance 

When calculating reinstatement value, business owners naturally focus on the cost of new materials and labour to rebuild. However, clearing the site of debris and making sure it’s safe for new construction is often underestimated or even overlooked in RCAs. 

Disposal costs have also increased with the UK Landfill Tax surges. From April 2025 to April 2026, the standard rated material has increased from £126.15 per tonne to £130.75 per tonne, and lower rated material increasing from £4.05 per tonne to £8.65 per tonne. Clearing potentially hundreds of tonnes of debris following a catastrophic fire or flood is significantly more expensive with today’s disposal costs in place. 

Finally, moving huge amounts of heavy waste requires specialised vehicles and machinery, which will face the impacts of the rising oil prices. 

How to ensure accurate insurance coverage in an uncertain world 

With rising costs and construction inflation surges fuelled by current global events, it’s crucial to ensure that your insurance coverage is up-to-date and accurate to avoid you having to pay extra. Underinsurance is a silent risk that can have catastrophic impacts. 

Here are some quick, practical steps you can take to ensure your organisation is not at risk. 

1. Commission regular independent reinstatement valuations

Independent RCAs, as provided by Charterfields, deliver objective, evidence-based figures that insurers recognise and can rely upon. These assessments analyse the most up-to-date BCIS data, global material shortages, and site-specific costs (such as the size of the waste removal process) in order to calculate an accurate rebuild cost. 

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 consumer inflation is 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.

Conclusion

While inflation is always in the news for its fluctuations and impact on everyday lives, it’s so important to be aware that construction inflation, which impacts businesses and their insurance coverage, is linked to global events. Without keeping a close eye on it and adjusting your insurance policy accordingly, you may be at risk if your business is ever confronted with a catastrophic loss. 

Don’t leave your assets at risk of underinsurance. Contact the team at Charterfields today to arrange a comprehensive Reinstatement Cost Assessment and ensure your declared values are adequately protected in the face of uncertainty.

The post Navigating Construction Inflation to Protect Against Underinsurance appeared first on Charterfields Limited.

Protecting these assets is a crucial step that is often overlooked – there is a common misconception that the landlord’s insurance on properties covers all additions or variations to the buildings. However, this usually isn’t the case.

In this article, we will explain Tenant’s Improvements, how to navigate complex rental obligations, the vital importance of correct demarcation, and how to accurately calculate reinstatement costs to ensure you’re not missing out in the case of a total loss on your rented property. 

What are Tenant’s Improvements (TIs)?

When signing a commercial lease, tenants may assume that the building and all associated fixtures and fittings are entirely covered by the landlord. However, typically, landlords will only insure the bare shell of the building or the building in its physical state at the exact moment it is handed over to a tenant. This includes any external works, hardstandings and outdoor areas up to the site boundary. 

Any modifications that a tenant makes during the lease period is usually their responsibility to insure – these changes in the nature of fixtures and fittings to the building are called Tenant’s Improvements (TI). This includes structural alterations or fitouts that are designed to make the space operational for a business. 

Here are some Tenant’s Improvements examples:

• Mezzanine floors 
• HVAC systems (heating, ventilation and air conditioning) 
• Electrical and infrastructure upgrades 
• Internal partitioning and office fitouts, including suspended ceilings and purpose-built meeting areas 
• Specialised operational installations, such as walk-in refrigerator or commercial kitchen setups

Tenants often mistakenly believe that their landlord’s insurance covers changes to the building. However, in the case of a total loss in an insured event, such as a fire or flood, the landlord’s policy may not pay for the tenant’s losses. Without their own insurance for these improvements, tenants may end up out of pocket for anything they have lost.

Navigating lease obligations 

Understanding which party is obligated to insure specific elements of a commercial rented building is rarely straightforward. 

While a lease contract may specify that that landlord is responsible for insuring the building, the legal definition within that agreement may exclude any tenant-installed modifications. However, when it comes time for tenants to renew their leases, the insurance obligations can change in accordance with new lease terms, meaning the responsibility of insuring these changes may revert to the landlord. 

For example, if the landlord insures the building it is a landlord’s discretion to either absorb a tenant-installed fitout into their insurance cover, or push more liability onto the tenant to insure it themselves. This should be made clear to both parties to ensure that every asset is adequately covered. For full insuring and repairing leases, there is less likelihood of a gap in insurance.

For organisations managing multi-site properties, a one-size-fits-all approach to their insurance introduces severe risk. Leases negotiated at different times, with different landlords, or under varying circumstances and market conditions will inevitably create discrepancies and contrasting clauses. An asset that is classed as the landlord’s obligation to insure at Site A may be deemed the tenant’s insurance liability at Site B. 

Relying on broad assumptions often leads to inadequate cover, which opens further cases for the issues that arise with underinsurance, overinsurance, and even double insurance cover. 

For businesses to best protect their finances, insurance obligations must be reviewed and audited on a building-by-building or site-by-site basis. 

Demarcation of assets

There is often a difficulty in drawing a line between what constitutes a Tenant’s Improvement (TI), and what is simply contents. One of the most common causes of friction in insurance claims is what constitutes the building, and what counts as contents. Getting this distinction correct to ensure all of your assets are properly insured is crucial. As a reminder: 

• Buildings: typically includes fixed items permanently attached to the structure of the property, such as mezzanine floors, ceilings, air conditioning units, and purpose-built meeting rooms 
• Contents: loose items such as demountable internal partitions, desks, and office furniture

This demarcation of assets is crucial as insurers may apply different premium rates to TIs compared to contents. For example, if a tenant spent a substantial amount on specialised TIs, such as integrated LED lighting and suspended acoustic ceilings, these assets will be permanently fixed to the structure and are less likely to face minor accidental damage. Therefore, insurers will often apply a lower premium rate to them. 

Loose office furniture and computer equipment may face a higher premium rate due to the perception by insurers that they carry a much higher risk of theft and damage. 

If the tenant were to categorise their LED lighting and acoustic ceilings under general contents, they could face an inflated premium rate for those elements every year. 

Failing to properly assess and declare the appropriate demarcation leaves businesses exposed to premium overpayment, or claims disputes and the application of ‘average’ clauses. Getting an accurate insurance valuation is crucial to not only prevent any financial losses, but can also protect from reputational damage or legal costs. 

Historic costs vs reinstatement costs 

When determining declared values, many businesses will turn to their fixed asset register for a starting figure. While referring to the original historic cost of a particular asset is a useful beginning point, simply relying only on this and declaring what a fitout or asset originally cost as the basis for current insured values can be a huge mistake. 

In the case of reinstating assets, their value will be impacted by the rising costs of labour, professional fees, permit costs, building materials, and plant and machinery from inflation. As these expenses continue to rise, the original cost of the fitout becomes irrelevant, especially if the application of depreciation is adopted.

Determining the correct declared value requires a thorough item-by-item analysis. Relying on historic costs is often where insurance gaps occur. In the event of total loss or a need to repair, this would typically cost much more in today’s economic climate. 

However, the converse can be true. The tenant may have spent a considerable amount of costs in bringing a building up to an acceptable standard for occupation including redecoration, changing lights, moving internal walls, resurfacing flooring or external areas, and bringing the space up to current building code standards. In the event of reinstatement of the building, these costs would likely be incorporated into the new rebuild cost, so the tenant does not need to separately reflect this.

An accurate, up-to-date Reinstatement Cost Assessment (RCA) ensures that these modern costs are reflected in their insurance policy, so that the assets can be adequately covered.

Best practices for tenants 

Accurately identifying and valuing Tenant’s Improvements is essential to ensuring adequate insurance cover in the face of a total loss of an asset. Here is a handy checklist of best practices for tenants to consider:

 1. Review leases on a site-by-site and building-by-building basis 

For businesses with multiple sites and buildings in their portfolio, it is crucial to review insurance policies and reinstatement costs individually, particularly following lease renewals or the signing of new contracts. 

2. Establish clear asset demarcation 

Understanding and separating fixed building alterations from moveable equipment and general contents will help businesses to prevent any assets being underinsured or missed entirely. This will also ensure an appropriate premium rating. 

3. Account for modern reinstatement costs

Ensure that valuations do not use depreciated costs, and instead account for inflation and current reinstatement costs for crucial aspects such as labour, building materials, and professional fees.

4. Arrange an up-to-date Reinstatement Cost Assessment 

Regular professional valuations from RICS-approved valuation specialists helps businesses to eliminate coverage gaps, protect against underinsurance, and ensure that they are paying accurate premiums. 

Time to assess your declared values and stay protected

By taking a careful site-by-site approach to assessing and declaring reinstatement values, business tenants can ensure that their operational assets remain fully protected when a loss occurs. But don’t wait for disaster to strike – reviewing your property’s insurance on a regular basis is a sure way to ensure that you are fully protected in line with changing values. 

At Charterfields, we specialise in reinstatement cost assessments, with particular expertise in the assessment of Tenant’s Improvements and navigating complex lease arrangements. Feel free to get in touch with us if you’d like a no obligation proposal to assess your assets and ensure you’re adequately covered.

The post A Complete Guide to Tenant’s Improvements & Reinstatement Costs appeared first on Charterfields Limited.

In our recent Insurance Gap Report, we discovered that the rates of insurance for some businesses we investigated were higher than they needed to be. 13.1% of sites we visited were overinsured for property, an increase of nearly 2% in just two years.

In this article, we will unpack the meaning of overinsurance, how it impacts businesses, and, most critically, how it can be avoided to prevent any losses.

What is overinsurance?

Overinsurance occurs when a policy holder insures their assets for more than the actual value to reinstate them in the case of a total loss. 

For example, if a piece of your machinery is worth around £200,000, but you have taken out an insurance policy to cover it for £300,000 – this would mean your asset is overinsured. If this asset was destroyed, the insurer would only pay out £200,000, and the extra premium would be completely wasted. 

Here are some of the common causes of overinsurance for businesses:

1. Indexation 

Policyholders may often apply automatic percentage increases to their asset’s reinstatement costs each year in order to account for the impact of inflation impacting these costs. This is known as indexation. 

While this is good practice to prevent underinsurance, these indices, if applied indiscriminately, can increase coverage beyond what is necessary. If the actual replacement cost of certain machinery has decreased over time, for example due to increased supplier competition or technology advances, but a generic 5% index is added every year, the business ends up insuring for too high a value.

2. Misjudged asset allocation 

For businesses with multiple sites, warehouses, or offices, their assets will rarely be fixed to the one location. Often, machinery is moved, stock is transferred, IT equipment is distributed, and medical equipment is shared out. 

A site may be adequately insured for the assets typically within their everyday facilities, but once it moves to another location, they could end up overinsured as they may be paying premiums for equipment that is no longer there. 

This also creates an issue with underinsurance, where the site that has received the equipment does not have coverage that reflects these new assets. In the case of damage or total loss in an insured event, such as a fire, it could mean that this site won’t receive a full payout. They will be forced to find the remaining capital to reinstate the assets that have been lost, impacting business finances to close that gap. 

3. Depreciation

Assets usually decrease in value over time – due to physical, economic or functional obsolescence. This can often happen in the time between Reinstatement Cost Assessments (RCA) being carried out, which is typically every three years as recommended by the Royal Institution of Chartered Surveyors (RICS).

If a business insures an asset on the basis of indemnity value or actual cash value, rather than full reinstatement, for example where they may not wish to reinstate in the event of a loss, they will end up overpaying on premiums if they are not reflecting these additional obsolescence factors over time. 

4. Inaccurate estimations 

When businesses take out an insurance policy, if they have not carried out an RCA in a few years, or their asset has substantially changed since their last valuation, they may be unsure what it is actually worth. When this happens, businesses may round up the figure they have in mind, just to be prudent. 

However, without a proper review and accurate figure in mind, this estimation can lead over time to material overinsurance – highlighting the need for regular and accurate insurance valuations.

What happens if you are overinsured? 

While this overpayment may not seem to carry the same immediate risk as underinsurance, , it actually still poses many issues to a business over time. Being overinsured means your business may face the following:

• Higher premiums: an insurance policy taken out for more than the asset’s actual value leads to higher premiums, which is ultimately wasted payments as the insurer will only pay up to the asset’s value and no higher. 

• Unnecessary financial pressure: capital that is used towards redundant insurance coverage could otherwise support corporate savings or strategic investments. Using business funds on unusable policies ultimately creates a strain on finances, especially if the overinsured policy is in place for several years. 

• Complex claims processes: when a claim needs to be made, overinsurance can cause some complications. Insurers may see the high premiums on a business’ insurance policy and investigate the claim much closer than they would have done if the asset was appropriately insured. This can lead to delays or even disputes, putting a strain on business continuity if they rely on quick recovery for their operations. 

Our recent overinsurance findings

At Charterfields, we prepare an annual report analysing the extent of under or over insurance across various UK sectors. Within each industry, we evaluate the state of insurance for both buildings and civil works, and plant and equipment. 

The research informing this report is drawn from comprehensive Reinstatement Cost Assessments (RCA) conducted across numerous locations per sector. 

Our 2026 report found that across both buildings and contents assets, a handful of locations were overinsured: 

Our findings indicate that businesses across many locations are struggling to accurately assess and insure their assets. Through whatever cause, these overpayments are leading to further long-term issues that can be easily prevented. 

How to avoid overinsurance

The best way to avoid overinsurance and its negative effects is to carry out frequent insurance valuations. An RCA is a professional report, best carried out by a RICS-regulated firm. This helps determine the accurate costs to reinstate or replace the existing assets or property “as new” in the event of a total loss by an insured event. 

The purpose of an insurance valuation is to ensure that businesses have appropriate coverage to prevent these potential losses. They ensure that the insurance policy is up to date with the latest costs that may impact reinstatement, such as supply chain disruptions, currency exchange fluctuations, labour shortages, and inflation. Overall, this frequent practice prevents the business from suffering financially after an insured event. 

Due to the volatility of these factors, we at Charterfields recommend that declared values should be updated annually, even if this is just an indexation to reflect current rebuild inflation, or if assets materially change. This doesn’t always require a full inspection and rebasing, but adjustments need to reflect the correct inflation, any capex movements and any other changes on site. 

Ensuring your asset register is updated by location in real-time as assets are moved around and purchased also ensures that you avoid overinsurance from misjudged asset allocation, as discussed above. Up-to-date asset registers safeguards your insurance policy and guarantees that every asset in your inventory is accounted for and protected. 

We offer a number of areas of asset management and financial reporting support, including the design and implementation of asset registers for insurance, financial and engineering applications, asset reconciliation, depreciation profiling, and more.

Partner with the experts in insurance valuations and asset management

If you’re concerned that you may be at risk of overinsurance, or it has been a while since you last carried out an RCA on your assets, it may be time to arrange your next insurance valuation. 

A regular RCA is a crucial step in avoiding the risk of assets being overinsured, and businesses wasting high premiums. We recommend that businesses be aware and vigilant of their risk profile changing in an ever-changing world. 

At Charterfields, we specialise in insurance valuations and helping organisations with their asset management. Feel free to get in touch with us if you’d like a no obligation proposal to assess your buildings and/or contents to ensure you’re adequately covered, or to discuss your asset register.

The post What Does Overinsurance Mean, and How Can It Be Avoided? appeared first on Charterfields Limited.

To maintain this safety net, the Royal Institution of Chartered Surveyors (RICS) recommends that a full assessment should be carried out either every three years, or as soon as there is a considerable change to a location. If your company is currently approaching either of these milestones, it’s time to start preparing for your next valuation. 

This can feel like a daunting, time-consuming task. An inaccurate declared value and insurance policy can leave a business exposed to the silent risk of underinsurance. In our most recent findings, we discovered that, despite lower inflation in recent years, high levels of underinsurance are present across many industries and locations. Both buildings and contents at all locations we inspected are overwhelmingly underinsured, at 87% and 83% respectively.

The valuation process doesn’t need to be a stressful responsibility. In this article, we will unpack the exact methodology and process that insurance focused surveyors use to generate an accurate valuation report. Our aim is to help businesses prepare for their next RCA and understand what to expect on the day of the inspection. 

What is a reinstatement cost assessment? Why do they matter?

A reinstatement cost assessment (RCA), also known as an insurance valuation, is a professional evaluation report commonly carried out by a RICS-qualified surveyor or similar professional. This will determine the cost to either reinstate or replace the existing assets or property “as new” in the event of a total loss or if they were destroyed by an insured event. 

Businesses often mistakenly confuse the market value of their asset with its reinstatement cost. This is the difference between what it’s worth to resell and what it actually costs to rebuild or reinstate in the case of a total loss.

Rebuild costs can be impacted by inflation, as the costs of materials, labour, and equipment rise over time, and often at different rates to published consumer cost inflation. In the period between reinstatement cost assessments being carried out, inflation and changes in the assets can radically alter the appropriate values to declare to insurers, and could mean that insurance coverage is no longer adequate. This is why frequent and precise insurance valuations are so crucial.

The purpose of an insurance valuation is to ensure that businesses have adequate insurance cover to meet these potential losses and prevent any financial suffering. 

The valuation methodology

The methodologies adopted for reinstatement cost assessments differ by the assets being inspected. They usually incorporate the following key stages:

What information do you need to gather for your surveyor?

A thorough and accurate valuation assessment often begins long before a qualified surveyor even sets foot on site. 

Before the day of the visit, a surveyor will be in touch with you to ask for a range of information depending on the type of assets being evaluated. This is to help them understand more about your company, your current insurance situation, and your assets. 

Typically, they will request to see:

• Lease documentation, if a leasehold interest exists, either held or granted to third parties to ensure that insurance responsibilities are understood and match to your policy terms.
• The financial fixed asset register for each location to understand historic costs and to identify any assets that might be missing during the physical inspection.
• Cost data for any construction projects completed in the past three years.
• Information covering future planned capital building or equipment projects.
• An asbestos report for any buildings constructed before the year 2000, since this can impact the allowances for demolition and debris removal.

The list of this required information is included in initial proposals, so you will have plenty of time to prepare and collate this data in advance of inspections. 

To assist with the process even further, it is helpful (though not always essential) to provide the following information to your surveyor: 

• Up-to-date building plans
• Asset registers or equipment schedules
• Site layout drawings
• Details of recent changes or projects

Compiling this data in advance of the inspection will greatly speed up the process, help reduce the time needed on site (so minimising disruption) and ensure accuracy in the final valuation. Ideally, surveyors would need this information at least a week before the inspections to allow time to review and prepare preliminary analysis.

They will use this analysis to map out their approach, identify any complex assets they will need to check on site, and generally maximise their time on-site and ensure there’s no wasted time or disruptions. 

What will happen during the site inspection?

When they first arrive, the surveyors will usually require a short tour of the site with a member of staff, including any necessary safety inductions required. This will help the valuers to truly understand the facility and its assets. For plant assessments, it is ideal for the tour to be taken with a member of the business who has thorough knowledge of these assets. 

Following the initial tour, the buildings surveyor will begin their inspection either with an escort (ideally a facilities management team member) or independently (subject to unrestricted access to all areas of the site). During this time, the surveyor will:

• Inspect the internal and external areas of the building(s) to note the construction form and assess the age of the building , or
• Take test measurements and check them against the plans previously provided 
• Take photographs for reporting and verification 
• Consider whether there are any restrictions to demolition of the existing building that will results from the surrounding environment

The plant valuer will usually work their way through the facility room by room, documenting the major assets and collating details of the various contents, including mobile plant.

At the end of the visit, the surveyor(s)  will hold a short closing meeting with a senior engineer or site manager to clarify any points and queries identified during the inspection. The inspector will also confirm any outstanding information that they may still need from the business, which can be collated and delivered after the visit. 

Delivering the final Insurance Valuation Report

With the information gathered before and during the visit, the surveyors will be able to calculate the total cost of reinstating the property and produce a comprehensive Insurance Valuation Report. 

This document is passed to the client for them to share with their insurance brokers for them to advise on adjusting the business’ insurance policy as needed. Doing so will eliminate any risks of underinsurance or overpaying on premiums. 

A 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.

Contact our team of experts today

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.

The post A Step-by-Step Guide to Reinstatement Cost Assessments appeared first on Charterfields Limited.

The risk is especially true for the hospitality industry in 2026. Our report found that this sector – covering hotels, resorts, and tourism – is on average 18% underinsured on their building assets. 

In the event of a total loss, this gap would mean that on average hospitality businesses are at risk of receiving roughly 80% of the rebuild cost of an equivalent facility. This shortfall could force a business to self-fund the remaining reinstatement costs – a shortfall that could cause major challenges for business operations.

Understanding the hospitality sector 

For the hospitality industry, there isn’t a one-size-fits-all approach when it comes to declaring asset values, as it is such a vast and complex sector. It spans luxury hotels, expansive holiday parks, bars and restaurants, adventure theme parks, and budget-friendly out of town hotels. 

Each of these sub-sectors operate on different logistics and accompanying assets. When updating insurance policies to cover these assets, missing the specific nuances of them means that costs can often be under estimated and become consequently underprotected. 

In this article, we will explore the four key factors to get declared values correct and ensure that a hospitality business is adequately insured and protected. 

1. Demarcation of overlooked assets 

One of the most common causes of friction in insurance claims is what constitutes the building, and what counts as contents. Getting this distinction correct to ensure all of your assets are properly insured is crucial. As a reminder: 

• Buildings: typically fixed items permanently attached to the structure of the property. For hospitality, this would include en-suite bathrooms for guest rooms, kitchen extraction hoods in restaurants, integrated reception desks, and fitted bars.
• Contents: loose items such as hotel beds, free-standing furniture, restaurant tables, bar stools, as well as operational supplies and equipment. 

Across the industry, it is easy to overlook the smaller, operational assets that form the backbone of hospitality. Many valuations focus on the larger structure or general furniture but miss the operational items that keep the business running:

• Guest room supplies – linens, bathroom supplies, and in-room appliances such as kettles, trouser presses and hairdryers. 
• Food and beverage equipment – tableware, glassware, bar utensils, and cooking utensils.
• Housekeeping and maintenance – cleaning supplies and safety equipment, including fire alarms and smoke detectors.
• Administration – staff uniforms, stationery, and reception desk computers.

While replacing a broken kettle or a dozen wine glasses is a smaller, necessary expense as and when needed, in the event of a total loss where they must be replaced all at once the total cost can be substantial. And this is the hidden cost that is often overlooked in internal estimates or incorrectly valued when buried under generic contents figures. 

To avoid these gaps, it’s essential to regularly reassess the most up-to-date replacement costs of your property and contents, and ensure that no assets are missed out from your declared values.

Misunderstood inventory assets

In high-end hospitality venues, some assets can be misunderstood. This is especially true for wet (beverages) and dry (food) stock. They may be covered under separate insurance policies, or sometimes forgotten altogether, making it very easy to overlook the material cost of replacing these all at once in the event of a loss.

For premium hotels or wine bars with substantial investments in high-end wines and spirits, accurately valuing these stock levels is crucial in preventing significant financial loss. Total loss or destruction of this stock during an insured event could lead to replacing tens of thousands of pounds worth of inventory.

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

In reinstatement terms, this means more materials, more infrastructure and more complexity which needs to be considered in the reinstatement costs for the subject premises. 

2. Navigating complex ownerships

Within modern hospitality, there is often a complex relationship and structure between property owners, management companies, and operators, particularly for hotels and holiday parks. 

For example, hotel buildings are often owned by property investors or private equity firms. They will then appoint management companies or pay to use a brand’s franchise, such as the likes of Hilton and Premier Inn, to use its branding and booking systems. The hotel brand will pay to use the building space for their operations, with the investor or firm effectively acting as a landlord.

In this model, particularly where the building owners have constructed or fitted out a building to the operators specification, there is a danger of assuming the other party has insured a specific asset. For instance, where there is substantial IT infrastructure and cabling, if there is an issue with this, the operator and building owner may dispute who claims for the cost of the repairs. 

Ultimately, in the case of emergencies, those involved may find that assets are uninsured and not covered for payout, leaving them to pay expensive repair costs themselves. 

To avoid this risk, lease or management agreements ought to be carefully reviewed to see who is contractually responsible for insuring each asset type. 

Third-party occupiers

The same issue arises with agreements between third-party occupiers and franchises, for example:

• High-end restaurants within a holiday park
• Spas inside in hotels
• Cafés operating on a theme park site

Often, the park or hotel may cover the initial build out of the space, but the third-party occupier will cover their own specialised contents used for business operations. Again, if the assets aren’t clearly demarcated or defined, they can end up uninsured. 

Independent insurance valuations can highlight any anomalies and ensure that coverage is evident and indisputable from the beginning. 

3. Site boundaries & shared spaces

Holiday parks, resorts, and theme parks face unique challenges around layouts and perimeters. Especially as they work with third-party operators occupying space on-site, there are often questions raised about who takes on the responsibility for underground services, lighting, and other outdoor elements that impact the fundamental operations of these businesses. 

Holiday parks also face ambiguity for any third-party owned lodges or caravans. Questions may be raised around the extent of the land boundaries for these guest accommodations, what assets these third-parties are responsible to cover, and whether the park owners insure the entire site and allocate costs back. 

These ambiguities can lead to delays in the event of a claim. Contracts and lease agreements usually outline these site boundaries and this can help define who is responsible for which assets when setting declared values. 

4. Higher values for listed buildings 

Many of the UK’s most iconic hospitality venues are listed; for example, The Savoy Hotel in London and Chatsworth House in Derbyshire. Grade I. II* and II listed buildings mean they are registered on the National Heritage List for England due to their historical and architectural significance. 

Listed status means that legal obligations are placed on the property owner regarding any alterations, repairs, or reconstructions. For example, listed building consent is required for any changes to the structure that could affect its character. Listing may cover both the exterior and the interior, and any object or structure fixed to the building. When they are authorised for alterations, these listed venues cannot be rebuilt with standard, modernised materials. 

Reinstating listed hotels and restaurants often requires specialist surveyors, subject matter expert architects, heritage consultants, traditional materials (such as lime, mortar, and hand-carved stone), and specialised labour. All of which cost much more than modern hospitality buildings. 

Declared values need to account for these aspects, as well as the extended time it takes for the various legal and regulatory hurdles that must be cleared before work can begin. This includes obtaining listed building consent and ensuring compliance with building regulations. 

Historic costs 

Reinstatement costs may be understated due to the gap between the original construction costs and the actual costs of rebuilding today.

In the event of total loss or a need to repair, this would typically cost much more in today’s economic climate. An accurate, up-to-date Reinstatement Cost Assessment (RCA) ensures that these modern costs are reflected in their insurance policy, and adequately covered.

These assessments are essential in securing appropriate insurance coverage. 

Final thoughts 

Underestimating reinstatement costs can be particularly devastating for businesses in the event of a total rebuild or costly repair.

For the hospitality industry, when daily operation depends on efficiency for optimal guest experiences, operating with an 18% insurance coverage gap is a huge risk. Addressing the considerations listed above can ensure business continuity within this sector. 

By accounting for operational contents that are otherwise missed, truly understanding responsibilities in complex ownership agreements, determining clear site boundaries, and factoring in the true, modern cost of construction for heritage and listed buildings, your business can operate with certainty. 

At Charterfields, we strongly encourage hospitality business owners and third-party operators to review their current declared values regularly and check that their assets are not at risk from incorrect or missing insurance coverage. A professional insurance valuation ensures coverage aligns with modern needs and regulations to avoid underinsurance gaps. 

To discuss any valuation requirements, please get in touch with the Charterfields team today.

The post 4 Factors Defining Accurate Declared Values in the Hospitality Industry appeared first on Charterfields Limited.

In today’s construction and regulatory environment, this approach carries increasing financial and operational risk for UK operators.

Escalating construction costs, tightening environmental regulation, evolving treatment technologies, energy price volatility, supply-chain disruption, and persistent skills shortages have fundamentally changed what it costs to rebuild water and wastewater infrastructure. As a result, reinstatement cost values developed “in-house” – even where based on best intentions – frequently lag behind market reality, exposing asset owners to underinsurance, funding gaps, and delayed recovery following a major loss.

The complexity of water and wastewater treatment works

Unlike conventional commercial or municipal buildings, water and wastewater treatment works are process-driven, equipment-intensive environments. Their value is not determined by floor area, but by a highly integrated system of civil structures, mechanical processes, electrical infrastructure and digital control systems.

Major components typically include abstraction and intake structures, reinforced concrete tanks and settlement basins, pumping stations, blowers, advanced filtration and treatment systems, electrical substations and switchgear, standby generation, instrumentation, telemetry and SCADA systems, and chemical storage and dosing facilities. Each element has distinct cost drivers, long procurement periods, and specialist installation requirements that are not adequately captured by high-level construction indices.

Why in-house reinstatement cost models are falling behind

Historic capital costs no longer reflect rebuild reality

Many UK treatment works were constructed or significantly upgraded decades ago, often under different regulatory expectations, with lower levels of automation and simpler electrical and mechanical installations. In the event of a major incident, reconstruction would need to comply with current standards, modern design requirements and today’s construction market conditions, not those in place when the original asset was delivered.

For UK water companies, this means rebuild costs must reflect modern resilience expectations, tighter discharge consents, and more sophisticated process control and monitoring requirements.

Published cost data can mask true escalation

Water companies often rely on published construction indices, regulatory reporting data or internal capital programme benchmarks to update reinstatement values. While useful for high-level planning, these sources frequently understate real-world rebuild costs for specialist infrastructure such as treatment works and pumping stations.

Key cost pressures in the UK context include:

• Volatility in the price of steel, electrical components and imported process equipment
• Concentration among original equipment manufacturers (OEMs) supplying pumps, blowers, membranes and control systems
• Extended lead times for bespoke mechanical and electrical plant, increasing exposure to cost escalation during reconstruction
• Regional demand driven by AMP investment cycles, network resilience programmes, and environmental compliance schemes

In practice, tender pricing for water sector projects has often risen faster than headline construction inflation, particularly for mechanical, electrical, instrumentation and control elements.

Modern regulatory requirements increase rebuild costs

Reconstructing a treatment works in the UK today is rarely a like-for-like exercise. Any reinstatement would need to meet current environmental permits, updated health and safety standards, modern electrical compliance requirements, and enhanced resilience expectations.

This can include:

• Higher environmental protection standards for effluent quality
• Additional storm overflow monitoring and control measures
• Greater emphasis on energy efficiency and carbon reduction
• Flood resilience and climate adaptation requirements
• Increased levels of redundancy and remote monitoring

These requirements often translate into larger or more robust structures, additional treatment stages, higher electrical loads, more complex control systems and enhanced site security. Such changes can materially increase reinstatement costs and are often under-reflected in internal estimates based on historic schemes.

Supply chain and skills shortages add hidden risk

Water treatment infrastructure depends heavily on specialised, often custom-manufactured equipment sourced from a limited supplier base. Lead times of 12 to 24 months are increasingly common for large pumps, blowers, transformers and switchgear.

At the same time, shortages of skilled labour in key trades – particularly electrical, instrumentation and control engineering – are contributing to regional cost premiums and programme delays. In the UK, competition for these skills across utilities, energy, transport and infrastructure projects further compounds the challenge.

These constraints introduce escalation and reconstruction risks that static reinstatement values rarely capture.

Insurance and asset management Implications

Understated reinstatement costs increase the risk of underinsurance, which can result in significant unfunded reconstruction costs, prolonged service disruption, and difficult decisions around scope, compliance and affordability following a loss.

For regulated UK water companies, this risk has additional implications. Extended outages or constrained rebuild programmes can affect service performance, regulatory compliance, and customer commitments.

Reinstatement values also underpin asset management planning, including long-term investment prioritisation and risk assessment. When asset values are understated, the perceived risk profile is also understated, potentially leading to misaligned capital investment decisions and a false sense of resilience.

From an insurance perspective, outdated or unsupported values can complicate underwriting and claims settlement, increasing the likelihood of disputes over appropriate rebuild costs following a major incident.

The role of qualified appraisal professionals

Developing reliable reinstatement costs for water and wastewater treatment works now requires specialist expertise, current market intelligence, and independent professional judgement. Qualified valuation and appraisal professionals bring experience in complex, process-driven infrastructure, access to current regional construction and equipment pricing, and a detailed understanding of evolving regulatory and design requirements in the UK sector.

Professional appraisals can also incorporate realistic reconstruction timelines, procurement risks and cost escalation assumptions, providing a more robust and defensible basis for insurance placement and asset management decision-making. 

A strategic imperative for UK water companies

Water and wastewater treatment works are foundational assets and among the most expensive and complex to rebuild. In an environment defined by rising costs, tightening environmental regulation, supply-chain uncertainty and increasing scrutiny of sector performance, reliance on internal reinstatement cost estimates alone can expose water companies to significant financial and operational risk.

Engaging qualified appraisal professionals is no longer simply an administrative exercise for insurance renewals. It is a strategic investment in risk management, responsible asset stewardship and service resilience — helping to ensure that insured values reflect current construction realities and that critical infrastructure can be restored quickly and effectively when it is needed most.

The post Getting Declared Values Correct for Water Infrastructure Assets appeared first on Charterfields Limited.

When damage happens to a significant asset, it has potential to disrupt operations if it does not have adequate insurance coverage. Accurate insurance valuations are crucial for businesses to protect against these damaging incidents and maintain business continuity without worry. 

In this article, we’ll explore the importance of precise and up-to-date insurance valuations to protect your business in the face of harmful events. 

What is an insurance valuation? 

Also known as a reinstatement cost assessment (RCA), an insurance valuation is a professional evaluation report usually carried out by a RICS-certified surveyor. This will determine the cost to either reinstate or replace the existing assets or property “as new” in the event of a total loss or if they were destroyed by an insured event. 

The purpose of an insurance valuation is to ensure that businesses have adequate insurance cover to meet these potential losses. This prevents the business from suffering financially after an insured event. 

When should an assessment be carried out? 

The Royal Institution of Chartered Surveyors (RICS), and many insurers, recommend that an insurance valuation should be carried out every three years, or when there is a substantial change to a property or asset. 

However, supply chain disruptions, global inflation rate volatility, and labour shortages have pushed up rebuild costs in 2026. Consequently, reassessments carried out even 18 months ago may not reflect the financial changes from shifting global economics, and businesses may not be sufficiently insured in today’s climate. 

Therefore, we at Charterfields recommend that declared values should be updated annually, even if this is just an indexation to reflect current rebuild inflation, or if assets materially change. This doesn’t always require a full inspection and rebasing, but adjustments need to reflect the correct inflation, any capex movements and any other changes on site. 

The risks of insurance valuation gaps 

An accurate, up-to-date insurance valuation is crucial to ensure that businesses are not underinsured or overinsured on their assets. Either extreme carries the risk of significant financial losses. 

Our recent Insurance Gap Report, prepared annually to analyse the extent of under or over insurance across various UK sectors, found some fascinating results:

• Both buildings and contents at all locations we inspected are overwhelmingly underinsured, at 87% and 83% respectively.
• For 13 key sectors whose buildings and civil works we assessed over the last seven years, the average rate of underinsurance sat at 24.27%.
• Across seven sectors that we analysed, the average rate of underinsuring contents sat at 93.60%.
• The Automotive industry appears to be overinsuring some building assets by some 15%. 

These staggering figures indicate the underlying issues in how locations are setting declared values for assets in the first place. In the case of total loss, businesses in these sectors would find themselves exposed. 

Failing to ensure your declared values accurately reflect your assets carries three potential risks:

1. Financial losses

In the case of either over or underinsurance, financial losses are a serious risk. 

If a business’ assets are underinsured, this means the declared value in an insurance policy is lower than their true reinstatement cost. So, if the assets are damaged or destroyed in an insured event and a claim is made, insurers may invoke the ‘average’ clause in the policy. While this policy clause was sometimes removed in the past, it has made its way back into many property damage policies. In practice this means insurers may pay out only the ratio of the declared value to current reinstatement cost irrespective of the size of the loss. So if you are 20% under insured, insurers may only meet 80% of any claim.

This means that the policyholder would then need to find additional funds to repair or rebuild the insured asset to its full operational standard. Finding and providing this additional cost may have a serious impact on some businesses, depending on the insurance gap and their financial reserves.

On the other end of the scale, overinsuring assets would also mean a financial loss. By overinsuring and overvaluing, firms can end up losing money on wasted premiums and coverage that they will not be able to use in the event of a claim. 

In the case of some firms in the Automotive industry, who appear to be overinsuring their building assets, this may be due to lack of clarification on the demarcation between property and plant, or infrastructure that has changed in line with newer technologies. 

2. Challenge to business continuity

Businesses with under insured property or contents may struggle to afford to replace them in the event of a total loss. 

In our 2026 report, we found that contents, plant and equipment for the Agriculture & Animal Feed industry have an actual reinstatement at an average of 290% of the existing declared values. For this rate, in the event of a total loss, agricultural businesses could recover from insurers only around 30% of any loss meaning they would be unable to replace their essential contents and specialised equipment. 

Even if insurers ultimately accept the claim, if they suspect under insurance, there can be a significant delay in settlement as the merits of the case are debated, impacting a firm’s ability to recover quickly from an incident. 

Since these assets are crucial for daily operations, failure to replace them may lead to operational downtime, causing supplier issues and customer dissatisfaction. Ultimately, these negative impacts would result in even greater losses to income, and potentially induce business closure.

3. Reputational and further legal damage

If a business cannot afford to replace or protect their assets, they may face scrutiny and reputation risk. Especially for supply chains and customer bases, seeing businesses not declaring accurate valuations may lead to distrust and questioning the company’s reliability. 

Delays in reinstatement following a loss can impact a business’s reputation. One example of this is the administration of a bakery in Manchester following a fire in 2023. During the rebuild period, production was outsourced to another bakery which led to quality issues and loss of sales as customers turned to competitors.

Furthermore, directors of these at-risk businesses could see hits to their personal reputations. Most directors take a conscientious approach to their duties, and in particular their responsibilities for appropriately managing the finances of a business. 

However, many directors are unaware that this duty could extend to ensuring appropriate insurance cover for fixed assets. If directors are responsible for losses incurred, that cannot be recovered due to lack of suitable insurance or underinsurance, directors may be subject to reputational damage, dismissal and/or litigation.

In many legal jurisdictions, a firm can bring a claim against an erring director if it can show that it has suffered financial loss.

Practical next steps to keep assets protected in 2026 

The risks outlined above are not to be ignored. They are a critical reminder of the harsh reality of not getting asset valuations correct. 

If you find that your business is potentially in a position where your declared values might  no longer represent your current assets, here is a short checklist of quick actions you can take:

• Internal audit 

Review your assets against their current reinstatement value (on a new for old basis). 

• Completeness

Has everything been included that ought to be incorporated in the declared values, for example external works (roads, fencing, minor buildings, etc), rented equipment and mobile plant?

• Identify any significant changes in your assets

For example, have buildings been extended or significantly renovated;  has machinery been replaced; has there been significant change in foreign exchange rates and your facility has a high degree of imported materials or machinery?

• Accurately identify buildings and contents

One of the most common causes of friction in insurance claims is what constitutes the building, and what counts as contents. Make sure you understand the appropriate demarcation and does this match to your insurance policy. Importantly ensure you’re not paying to insure the same asset twice, or not at all. 

If you find that you have identified any significant changes, the current cost is vastly different to your current declared values, or your assets are not insured properly as either buildings or contents, it may be appropriate to engage with RICS-qualified valuation experts, like Charterfields, to carry out a new reinstatement cost assessment to rebase values. 

Partner with the experts in insurance valuations

Ultimately, being adequately insured is not just a nice-to-have – it’s business-critical. Without suitable coverage in the face of damaging events, there are significant risks to your supply chain, business reputation, business continuity as well as potential legal exposure. 

Accurate valuations prevent wasted premiums from overinsurance, and the losses tied to underinsurance. 

We strongly encourage business owners and directors to review their current declared values and confirm that their assets are not at risk from incorrect insurance coverage. A professional insurance valuation ensures your coverage aligns with modern needs and regulations. 

To discuss any valuation requirements, please get in touch with the Charterfields team today.

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Preparing for the year ahead 

Rather than relying on accounting values, generic indices, standard average rebuild costs or online estimators, take control of your risk profile with a professional valuation. 

As our 2026 Insurance Gap Report makes clear, many UK businesses across almost every major sector are operating under a false sense of security. Whether it’s a catastrophic gap of almost 300% for feed mill contents, or a 15% overinsurance figure seen in the car manufacturing sector, the data has highlighted that having an accurate insurance valuation is no longer optional, but an essential action for business continuity and risk transfer. 

A professional Reinstatement Cost Assessment ensures your coverage aligns with 2026 market rates, industry nuances, needs, and regulations. 

Don’t leave it until it’s too late. To discuss your own valuation requirements, or to request a copy of the full 2026 report, contact the Charterfields team today. 

The post Which Industries Are Most at Risk of Underinsurance in 2026 and Why? appeared first on Charterfields Limited.