Outdated rebuild costs and the importance of a professional valuation

If you haven’t had a professional buildings valuation of your property in the last three to five years, then you may be underinsured.  Having the correct buildings sums insured for your home is important for four reasons:

1. Your claim might be disputed. If the insurer deems that you have deliberately or ‘recklessly’ underinsured then they may refuse to pay a claim completely.
2. There might be a shortfall in the event of a claim because the insurer may apply the average clause. This means that insurers can proportionality reduce a buildings claim if your buildings are are found to be underinsured.
3. There may be a delay in rebuilding your property. It’s a homeowner’s responsibility to set the buildings sums insured and it’s important to remember that there is no direct correlation between the market value of your home and the rebuild costs.
4. An up-to-date survey may mean your insurer gives you an uplift of 25%, 50% or even unlimited on your building sum insured for a set number of years.

Why your rebuild costs may have increased

Rebuild costs have risen because of higher demand and lower supply.   Furthermore, the energy costs associated with producing building materials, including bricks and plasterboard, have also risen significantly¹. Although insurers index-link sums insured to keep up with higher costs, according to the ABI it’s failing to keep up with the above inflation rises in the cost of many building materials².

What to include in your building sum insured

The building sum insured should reflect the full cost to rebuild your home from scratch, including:

• Outbuildings, driveways and walls
• Professional Fees and demolition
• Your insurer may want to include VAT

For more advice on what to include when setting your building sums insured you can read our article: Why your home might be underinsured

Why mortgage valuations aren’t reliable for insurance

A mortgage valuation is there to protect the lender. They often:

• May not be disclosed to a third party
• Give nil valuations (especially on older properties)
• Are cursory and not suitable for insurance

Can you rely on the Association of British Insurers’ (ABI) Building Cost Information Service (BCIS) calculator?

The ABI’s BCIS calculator is a useful tool designed to estimate the buildings sum insured of a standard UK home. However, the online calculator won’t work for:

• Buildings partly or fully built of stone.
• Houses with more than three storeys
• Properties over 320m²
• Listed or historic buildings
• Home built pre-1720

 The calculator isn’t a substitute for a professional survey.

Does a ‘blanket policy’ guarantee full cover? 

Blanket or unlimited policies will only come into play if there’s a total or near total loss.  Even then, the upper figure of blanket policy may no longer be sufficient due to rising rebuild costs. For more information, please read our article: Unlimited building insurance policies.

Who can help with a rebuild cost survey?

Companies such as BCH or RCA can survey your property and advise you of the rebuild cost. In some instances your insurer may cover the cost of the survey.

It’s important to note that a survey isn’t a valuation but a reinstatement cost.  Desktop surveys are also available.

What is a desktop survey and is it right for you?

Desktop surveys are less expensive than a site survey and they base the rebuild cost on satellite imagery and mapping software alongside the surveying companies own data.  A desktop survey may not be suitable for all properties. Larger and more complex properties may require a site survey.

What to do if you’re worried about buildings underinsurance

We have relationships with several survey companies and can:

• Guide you through the process
• Submit paperwork on your behalf
• Make sure your property is properly insured

Taking the time to review your building sum insured now could save you significant stress and financial loss in the future.

Contents underinsurance

Underinsurance doesn’t just apply to buildings, having the correct sums insured for your contents, at and jewelry is also important. As well as your general contents and fixtures and fittings, you need to consider the replacement costs for high value items and collectibles – where demand changes and values fluctuate. We have a panel of recommended valuation companies that can assist by not only valuing your pieces now, but by also giving you up-to-date valuations going forward.

For advice on what you need to consider when setting your content sums insured please read our article: Contents underinsurance

Next steps

For advice on underinsurance or to speak to us about your home insurance call 020 8256 4901 or email privateclients@howdeninsurance.co.uk

Sources

Home insurance premiums up – ABI – Insurance Today

https://www.homebuilding.co.uk/news/construction-materials-shortage