When a property is destroyed by a Fire or other peril, such as a Cyclone or Earthquake, one of the significant costs you will incur is the removal of debris. Damaged property cannot be repaired or replaced until the debris has been removed. The cost of removing debris from your premises is normally covered within the Fire and Perils section of a Business policy, or if it is a House, under a Home Insurance policy.
There are a number of ways that Removal of Debris can be covered under a policy, such as:
It mainly depends on the particular insurer. Each have advantages and disadvantages. In nearly all occasions though, the amount needed to pay for removing debris following a fire is never enough.
It is a very difficult amount to estimate and does need a specialist valuer or Building Inspector to assist. Removing Debris can involve loading material on to trucks and taken away to be dumped, digging up the concrete slab or foundations left and the worst scenario is that if it is a building built before 1986, it may contain Asbestos which needs specialist care and removal so that there is no contamination of the land or neighbouring property. In recent years, many state and local governments have enacted laws that stipulate how debris can be disposed of.
For many insureds, they have used the fairly standard figure of an extra 10% on the cost of rebuilding. Rarely is this enough, it is only a token guess but I have seen claims where more than 30% of the building sum insured was needed to remove debris leaving the Insured not enough to rebuild back to the same specifications as prior to the fire. If a capped percentage or specific sub-limit on the policy, you may have enough to rebuild but you have to pay the additional costs to remove the debris after these limits are reached.
While our Clients will always prefer to pay the least amount they need to, and we as Insurance Brokers can always advise to increase these limits, when there is a claim, there is great disappointment when the cover is not enough. Firstly for our client who does not benefit from hindsight, but also for us as we feel we have let our client down. While we are not builders or valuers, we can only advise and recommend that our clients invest in a professionally qualified valuer to tell us what the building should be insured for and that takes into account such additional costs within the rebuilding value. It really only needs to be done every three years but can be reviewed depending on the economic circumstances at the time.
There are some types of property such as Body Corporates that by law must obtain regular valuations, but there is no such requirement on an individual property owner.
We do suggest that you think about the Removal of Debris section of your Property policies because if it is not enough and there is a Fire or insured peril that destroys your building, it will cost you either by an extra out of pocket expense or a greatly reduced balance of the sum insured to pay the rest of the claim.
If you would like to discuss this further, please do not hesitate to contact us. CPR Insurance – experts who will save you.