Building and Contents (Industrial Special Risks - ISR)
This poicy covers the Congregations’ assets for any physical loss, destruction or damage not otherwise excluded happening at the situation and, for property in transit and money, extends away from the premises;
1. Building & Contents
Buildings and contents means all real and personal property belonging to the insured or held in trust for which the insured has assumed responsibility during the period of insurance anywhere in Australia.
Insurance Services amends the sums insured based on the commercial guide to current building costs every annual renewal. However, it is important for each congregation to ensure that separate values for each building, or group of connected buildings, are established and that the contents of those single buildings or connected buildings be regularly examined to ensure that the cover is/remains adequate.
For insurance purposes, all furniture and furnishings including carpets, curtains, internal blinds, pianos/organs (including pipe organs) and seating shall be considered to be contents. Only pews/seating that is permanently fixed to the building as a structure should be included Buildings.
Insurance for Buildings must be taken for the full current replacement value of each building unless otherwise arranged with Insurance Services.
Most contents must be insured for replacement value on a new for old basis and this must be considered when estimating the sums insured of your contents.
2. Types of Building Covers
Church buildings may be insured for:
- Reinstatement &/or Replacement Value; or
- Agreed Value; or
- Indemnity Value
The ‘type’ of insurance that is selected will depend on each situation.
When considering which cover is the most appropriate for a particular building, the decision to opt for either “Agreed Value” or “Indemnity Value” cannot be taken lightly. Claims would not be paid in full with either of these two covers as would generally occur with “Reinstatement &/or Replacement Value” cover. It is important for Church property to be adequately covered so that the Congregation will not be financially disadvantaged in the event of a major loss.
The Heritage Places Act requires that Heritage Listed buildings be properly maintained and adequately protected. Therefore, Heritage buildings must be insured for Replacement &/or Reinstatement Value. Neither Agreed Value nor Indemnity Value covers would be appropriate if a building is required to be reinstated due to its Heritage Listing or historical value to the township as it may only take a partial loss for a Congregation to find themselves in financial hardship to cover the remaining cost.
There are four possible responses to an event which results in significant damage or the loss of a building:-
- replacement of the building in exactly the same form and with the same building materials
- rebuilding in a modified form to produce a building which may be different in size and constructed with different materials, or
- substantial downsizing of the former facility
- Non-replacement of the building requiring only removal of debris from the site
Reinstatement &/or Replacement Value provides the greatest scope of cover because it allows for full reinstatement and replacement of the damaged/destroyed building to its original state when new, allowing for any additional requirements due to new legislative building codes (eg. disabled access). If the Congregation chooses to salvage and repair the damage, the Insurer must pay the full amount required to do so.
Reinstatement &/or Replacement cover also gives the Congregation the option of replacing the building with a completely different building and, if needs have changed, the Insurer would be required to pay up to the replacement value of the original building. Further, this cover offers additional protection of the “Limit of Liability” cover, which means if a building is inadvertently underinsured; it will be covered for its full replacement cost.
Agreed Value is appropriate if the Congregation has formerly resolved that they would no longer have a need for the building as it currently exists and would prefer to:
- replace the building with a smaller structure suited to its present use, and/or
- replace the building with a modern design and/or using modern materials that cost less then reinstating the building to its original design and/or materials
recognising there may be, however, external community pressure to reinstate the building to its former original glory. Most importantly, buildings insured for Agreed Value do not have the protection of the ‘Limit of Liability’. Thus a Congregation seeking to insure a building for Agreed Value would need to annually review:
- the intended use of the building
- the sum insured (due to constant increases in construction costs – is it adequate to cover demolition, removal of debris, professional fees and construction of intended building?) and
- whether this type of cover is still adequate (as needs may change over time).
Indemnity Value is a cover which insures the building for its present value. This means it is insured for its replacement cost less a reasonable allowance for depreciation based on the current age and condition of the property. It may be an option when the Congregation does not intend to rebuild at all. It must be pointed out that Indemnity cover should be selected with extreme caution. Considerable issues can arise when a partial loss occurs.
Example: If a roof is damaged in a storm the subsequent claim is limited to removal of the damaged portion of roof and the present value of repairing/replacing that damage. If the building is very old, only a small amount could be claimable due to depreciation being applied, which would result in the Congregation having to cover the remaining costs. If the Congregation cannot afford to cover the costs at the time, the building may effectively rendered unusable.
In summary, Indemnity cover should only be requested if a building is vacant (not being used at all) and would not be replaced in any form if it were to be substantially damaged or destroyed.
Sums Insured, regardless of cover type, need to be adequate to cover costs of demolition/removal of debris, professional fees and any additional costs likely to be incurred due to new legislative building codes.
When determining an appropriate Replacement Value building sum insured, an allowance should be made for the cost of reconstruction using same or similar materials (plus a country/regional loading if applicable) and include the cost of demolition & removal of debris; professional fees (Architects, Surveyors, Consulting Engineers etc.) and an escalation allowance. Substantial partial loss can sometimes result in a higher claim than a total loss due to the extra costs involved in preserving the remaining building and salvaging materials from the damaged section/s. Please Note: If in process of selling a property, the building should be insured for Replacement Value until settlement has occurred.
When determining an appropriate Agreed Value building sum insured, an allowance should be made for the cost of reconstruction of whatever building would be required, using whatever materials intended to be used (plus a country/regional loading if applicable) and include the cost of demolition & removal of debris; professional fees (Architects, Surveyors, Consulting Engineers etc.) and an escalation allowance. Consideration should be given to whether costs would escalate if a substantial loss occurred that left a considerable amount of the building standing.
When determining an appropriate Indemnity Value building sum insured, there are two things to consider:
- If the Congregation is unsure whether would demolish the building, or would only demolish the building if there was a substantial loss, it is best to ensure an allowance is be made for the cost of repairing a section of the building (plus a country/regional loading if applicable) and include the cost of demolition & removal of debris; professional fees (Architects, Surveyors, Consulting Engineers etc.).
- If the Congregation is sure they would demolish the building should any damage occur, an allowance is to be made for the demolition & removal of debris; professional fees (Surveyors, Consulting Engineers etc.).
This cover is NOT appropriate for properties that are occupied or occasionally still in use.
At no time should a building be insured for any less than its current ‘re-sale’ or ‘market’ value. The market value can be determined by obtaining appraisals from two independent real estate agents that operate within the area.
Changes to the type of cover must be approved by Synod’s Resources Board (or delegate) and must be satisfied with the basis of cover and insured value of each individual building under the church’s insurance program. Applications to change a building cover to either Agreed Value or Indemnity Value should be accompanied by the aforementioned appraisals.
Insuring your property for its full value ensures that all churches bear an equitable proportion of the cost of insuring all church properties within this state.
3. Loss of Rent and Landlords Liability
Where acting as a landlord and receiving rent from commercial ventures or from renting church property, it is important to contact Property Services and ensure appropriate leases are in place.
Insurance Services must be advised to ensure the Uniting Church SA insurance programme extends to cover this type of property use. Malicious damage by tenants and Landlords liability will then be provided as well as loss of rent if the premises are rendered un-tenantable by an insured event. Default of rent by the tenant is not covered.
Loss or damage to money:
- in transit to or from the premises;
- on the premises during business hours;
- on the premises outside business hours;
- in the personal custody of authorised persons whilst contained in their private residences;
- in safes, night safes and/or strong rooms;
- in the night safe of the bank.
Money stolen from:
- unlocked vehicles;
- unattended vehicles;
- a safe or strong room where a key or combination has been left on the premises;
- the open air.
- ISR claim form - JLT (213 kb PDF)