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The Value of Valuations: Museum Buildings and Collections
How frequently do you evaluate your museum buildings and collections? It’s an important question, particularly as values have increased considerably in the last two years. AIM Associate Supplier Hayes Parsons Insurance Brokers explain more.
Most commercial buildings in the UK, including museums, are under-insured. Let’s look at an example to see why this is important.
Imagine your insurance policy says your museum buildings are valued at £3,000,000 for rebuilding purposes. You think that sounds plenty, and at your insurance renewal each year the figure gets carried over without question, or maybe with a modest increase each time. You have not paid for a rebuild valuation in many years and it has not been raised by your broker.
Then a dreadful fire occurs, causing £500,000 damage. The Insurer sends the loss adjuster out to the site and reports back that the building has a true rebuild cost of £5,000,000. You are therefore 40% under insured and will in all probability see your claim reduced by 40%. That is a £200,000 shortfall in your finances.
Our advice is simple; it is worth employing the services of a Chartered Surveyor at regular intervals to value the rebuild cost of your buildings and update your insurance policy accordingly. Some argue a three-year interval is best due to rapid rises in rebuild costs (approximately 10% on average this year alone), and definitely worth considering if you have Grade 1 listed property, as the rise in material costs for Grade 1 property has outstripped other sectors. It is always wise to make sure your Chartered Surveyor has experience of valuing buildings like yours.
From fine art to former aircraft, classic cars to ceramics, scientific objects to serene sculptures: what are any of these worth when we call them a collection?
Again, let us look at an example. You have a policy for the fine art at your museum and insure the collection for £2,000,000. Within that collection are some specific higher value items that are noted on your policy schedule. You have stayed with the same insurer and broker for many years, and your predecessor at the museum set up the policy over 10 years ago, and at the time had professional valuations carried out. The broker has not mentioned up to date valuations, and you seem happy with what is arranged.
Once again, taking the example of a fire, some of your fine art paintings in one room, are destroyed. The value of these items is £500,000. You thought the terms “agreed value” in your policy schedule meant you would get £500,000 and you could put the money towards other paintings to complement what is left of your collection. But the loss adjustor asks to see your most recent valuations and from that point onwards the insurer points you to their policy wording which says they will only pay the “market value” of items that have not had up to date valuations. The market value could be significantly lower and is a lot more subjective in terms of what the insurer will offer to settle the claim.
It is true that professional valuations of artwork, or other collections, can be expensive, but they are far less expensive than facing a much smaller pay-out than hoped for, from your insurer.
Get in touch
The general advice given here is designed to create a conversation. We understand that each museum is different and has unique concerns. At Hayes Parsons Insurance Brokers we tailor our advice to your situation and would be happy to talk through your options.
To find out more please contact our museum expert, Martin Howard Cert CII on 0117 930 1668/07719 023 194 or email@example.com
Hayes Parsons are sponsoring AIM Conference 2022 and you’ll be able to meet them at the exhibition area on Thursday 16 and Friday 17 June.