The property must be properly insured. We have arranged a block buildings insurance policy for all of the properties we purchase for our pension schemes. The current policy is with Royal & Sun Alliance. The policy covers the risks normally covered by a buildings policy and we have taken the decision to purchase terrorism insurance cover in respect of all eligible properties.

At the back of the property form there is an insurance cover application section which needs to be completed and sent to us in every case. If any additional cover is to be included it must be specified on the application form. There may of course be an additional fee as a result.

All premiums will be paid from the SIPP by us and then, where possible, recovered from any occupational tenant as insurance rent.

The rebuilding cost of the property (where applicable) will be as advised by the valuer. This sum will be increased annually in line with a suitable index (usually an index prepared by RICS) unless a different sum is advised to us in writing. VAT on rebuilding costs will be included in the cover provided.

The insurance cover provides for up to three years loss of rent cover. This means the SIPP will continue to receive a sum equal to the passing rent payable by any occupational tenant in the event of damage to or destruction of the property by an insured peril. This of course on the assumption that the tenant is entitled to withhold payment in the event of such damage or destruction, as should normally be the case.

Please note that the insurance covers the building only. Therefore tenant’s improvements will not automatically be covered nor will fittings, trade equipment, stock and other tenant’s items. Trade interruption cover must also be separately obtained. If a quotation for these risks is required we can arrange for our insurance brokers to contact directly.

Please note that restricted cover may be applicable where property is unoccupied and there will be an increase in the excess payable annually after six months of unoccupancy. If property is unoccupied or it becomes unoccupied, please let us know in writing without delay. The insurer’s current requirements for unoccupied buildings can be found in the insurance notes.

If we purchase a property where insurance is arranged by a third party it will not always be possible for us to be shown as a joint insured. This will commonly arise where we purchases a long leasehold interest and insurance is effected by the landlord in his name under the leasehold arrangements. In this event a note of our interest in the insurance will be noted on the landlord’s policy. Please note however that such an arrangement does not cover us as property owner against public liability risks. Therefore in such a case it will be necessary for us to effect separate public liability insurance cover in respect of that individual property. These extra costs will be recovered from the tenant if the lease permits.

By insuring all properties together individual premium rates become competitive. But more importantly administration is made more straightforward and the risk of properties not being insured for one reason or another is minimised. In the event of commission being rebated by our brokers to us in respect of the insurance arrangements this commission rebate will be retained by us towards administration costs.

For full notes on insurance please visit our literature library.