Advice for Trust Professionals and Private Clients By Rossborough directors, Steve Moullin and Lee Refault
03 Sep 2013
Ensuring large and valuable assets are appropriately insured is vitally important, yet many trustees and private policy holders are not taking the appropriate measures to guarantee that an asset's true worth is accurately reflected in the insurance policy.
It is imperative that trustees successfully safeguard their clients' assets and private clients must also take steps to insure an asset to its accurate value. Under or over valuing a property or important asset can cause significant issues, but it remains all too common for valuable assets to be improperly insured.
Research by Aviva in 2009 highlighted that 77% of properties are underinsured. This is a shocking figure and one which trustees looking after client portfolios and indeed all property owners will want to avoid. A 10% shortfall on a one million pound property is a significant loss and the message is clear that underinsurance is a huge challenge for both insurers and policyholders.
Most problems with claims stem from insurance being improperly set up at the beginning of the process, in which case the insurer may either deny the claim or pay a reduced settlement. In the case of a reduced settlement, how would this difference be funded?
Trustees risk facing a very unhappy client who could apportion blame to the person charged with arranging the insurance, regardless of the rights and wrongs of the situation. Ultimately, trustees must be aware that failure to properly insure a building due to error or omission could lead to a client suing for damages. The trustee may have some protection from a professional indemnity policy but there will be a sizeable deductible to pay and a potentially damaged relationship with the client.
Trustees can often be placed in a difficult position because they are relying on information from other parties. This can lead to the wrong information being supplied to the insurance company and, in turn, a policy that does not properly protect the assets being issued. This can also become problematic if a policy includes certain circumstances, such as security or unoccupancy conditions, and these may not be adequately communicated to the occupants. This may result in a breach of terms which could lead to a claim being denied.
There are also significant repercussions for home-owners. If their policy is found to be incorrect, a substantial loss on insurance can have a major impact on their cash flow and could lead to them using savings to meet the shortfall. Common reasons for claims being declined include non-disclosure of material facts, for example the use of or construction of a property. This could be because the policy was issued on the wrong basis or with restricted cover. This often happens when the purchase decision is driven purely on price and therefore certain covers that could be easily included for not much more are missed off to keep the price as low as possible.
Rossborough has a well established Trust Insurance team ideally positioned to provide trust companies and property managers professional advice to ensure assets are properly insured with the correct policy and the right cover. Working closely with major UK insurers with exclusive products, the team can arrange cover for a wide range of property types at competitive rates. The highly experienced trust team are well used to ensuring clients' policies take into consideration accidental damage, subsidence or even terrorism.
Private clients insuring their own assets must also avoid the risk of undervaluing valuable assets. High net worth clients may have a yacht or plane they wish to insure, or a valuable art, antique or wine collection. The right insurance policy will cover the cost of any loss or damage to possessions.
On average, British households are underinsured by 30% and shortfalls only come to light when a claim is made, which is too late. Many people will add an asset to their insurance policy at the time it is purchased but neglect to review how much those items are worth, and so policies will not take into account any change in value and will be unprotected to their true value in event of them being lost or stolen. For example, the value of watches and jewellery that contain both precious metals and diamonds will increase in line with the price of both commodities. A specialist professional valuation will ensure that items are protected to their full value and these will need to be regularly assessed in line with changes in the external environment.
Not all insurance is the same and Rossborough's dedicated Private Clients team is accustomed to tailoring bespoke policies to cover a myriad of assets including holiday homes, fleets of high value cars as well as family and business travel.
With the right professional advice, it is relatively straightforward to take the necessary steps to ensure a trust estate, property or valuable asset is insured appropriately.
For more information contact:
Lee Refault, Director on 01534 500556 or firstname.lastname@example.org
Steve Moullin, Director 01481 241524 or email@example.com
Mark Vautier, Private Clients Manager on 01534 500614 or firstname.lastname@example.org
Laura Boyd, Private Clients Manager on 01481 241539 or email@example.com