How to avoid underinsurance
Find out how to make sure your property is insured for the correct value
The most important part when insuring your property is to calculate your rebuild value correctly.
The rebuild cost is the amount of money it would take to rebuild your home completely from scratch. This needs to take into account the price of labour and materials needed to build a house identical to yours on the land you own. The sum is often (but not always) less than the market value because factors like land, location and desirability are not factored into the price.
Follow these steps to make sure you are not underinsuring your properties.
To work out the rebuild cost yourself, first you’ll need to work out the floor area of your home, multiplying it by two if the property is two storeys. Then you’ll want to hire a surveyor, who will be able to take you through all of the costs with detailed measurements and a breakdown of every expense. Please note that a surveyor should be able to offer a detailed rebuild cost even if your home is historic, listed or not built from brick.
There are tools available that help to simplify the process, such as the BCIS calculator or the Association of British Insurer’s online calculator, which also takes into account every other aspect of your property, including local and regional housing trends. However, all these can offer is rough estimates.
If you’re still uncertain, you can get a survey from a RICS member to be confident that your rebuilding value is correct. This is particularly important if your property is of non-standard construction or in a conservation area where it may be more expensive to rebuild.
RebuildcostASSESSMENT.com carried out some research back in 2019 to find out how brokers’ clients were setting their buildings sum insured. They found that only one in 20 had a dedicated rebuild cost assessment completed by a regulated RICS company and over a third had used the market value. Alarmingly, 20% had simply guessed.
We recommend that this is carried out at least every five years. This is particularly important if you have extended or altered your property, or if property prices have increased significantly. A professional valuation will take every aspect of your property into account such as local and regional housing trends.
For an in-depth calculation, meanwhile, we’d recommend using RebuildCostASSESSMENT.com to provide an insightful on-site or remote property valuation.
For sum insured purposes the value needs to include both the main structure of the building and external areas and walls. The value will also need to include costs of demolition and removal of debris, costs of rebuild and materials and professional fees for services such as architects and surveyors associated with rebuilding. Professional fees can add up to 15% to the overall costs.
It is important to take out a residential landlord insurance policy as a standard home insurance policy will not protect you in the event of negligent tenant behaviour or damage to the property.
You should also check that your policy is index linked - this will increase your buildings sum insured at each renewal by a percentage based on the BCIS House Rebuilding Cost Index.Find out more in our article, why landlords need to understand how index linking affects their let.
Include everything (and we mean everything) when calculating your rebuild value. If you are even remotely uncertain regarding whether or not your properties are underinsured – and in the current climate there’s a good chance you are - then it’s imperative to act now before it’s too late. Don’t wait until you need to make a claim – address any potential issues today by contacting your insurer to make sure that you are not underinsured.
If you have any questions about underinsurance or would like to discuss landlord insurance with one of our experts, please contact the Total Landlord team on0800 63 43 880 or email enquiries@totallandlordinsurance.co.uk
