Farm buildings not in use may not seem worth insuring, but failing to do so can expose farmers to significant financial and operational risks. John Robson explains the main issues.
At first glance, disused farm buildings – which are sometimes dilapidated eyesores – may not seem to justify the cost of insuring them.
However, farmers are advised to consider a range of factors before deciding not to take out cover – even for their most run-down buildings.
Why it is important to protect against all eventualities
One of the most important questions to ask is: What happens if the building is damaged or destroyed by fire?
You could face a substantial bill for environmental clean-up costs if an uninsured building containing hazardous materials – especially asbestos sheeting – is burned down.
Another important issue to consider is that a building that may have stood idle for months, or even years, could be needed again very quickly as a result of a new business opportunity or changes to your operational activity.
It is all too easy to forget that a disused building has been removed from your insurance policy at annual review. Then, if the worst happens and it is destroyed by fire, your balance sheet could take a big hit. For this reason, farmers should regard all structurally sound buildings as assets that justify insurance cover.
How to make insurance cover reflect your specific needs
All buildings on your insurance schedule should be covered for debris removal costs, and you should also make sure the rebuilding value is enough to avoid any settlement being reduced if you make a claim.
Certain types of cover pay explicitly for asbestos removal after a building has been damaged, on top of the sum for which the structure is insured. It is important to keep in mind, though, that this type of extension may not apply to buildings that are uninsured.
Insuring on a ‘first-loss’ basis is a viable option for many farmers. In a nutshell, this means that if an old but functional building is destroyed, it could be rebuilt less expensively using modern materials, as opposed to the materials with which it was originally built.
‘First-loss’ cover is usually less costly than standard cover and comes with the benefit of keeping the building on your insurance schedule, including the asbestos removal extension.
Why listed buildings are a case for special consideration
Listed buildings in particular can result in a major financial loss if they are left uninsured.
You should always ensure your cover for listed buildings is enough to pay for rebuilding in traditional materials because the specialist construction methods typically required for repairing them are expensive.
Moreover, listed status means you cannot leave a damaged building in a ruined condition or simply demolish it.
Where listed buildings are concerned, it’s especially important that the rebuild value is assessed by a specialist professional, as opposed to the customary method of using a rate per square metre.
The need to regularly revalue all your buildings
It is also essential to emphasise that farmers should regularly have all their buildings revalued – including revised rebuild costs – including buildings that are no longer in productive use.
Your annual insurance review is a good time to discuss your cover in order to make sure it is fully aligned with your current activities.