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In the past, many homeowners assumed that the market value of their property represented a suitable figure for insurance coverage, or they depended upon a historic figure originally set by their insurance company (which has been index linked ever since). However, in reality, both of these assumptions can be risky and unreliable. I therefore recommend checking the exact amount your property is currently insured for to ensure it is accurate!

Escalating Costs

Since the Covid pandemic, the cost of repairing or rebuilding residential and commercial property has dramatically increased. It’s not uncommon for rebuild cost to now exceed market value of the property, especially if you own a listed building or your property is of unique construction.

Costs have increased for several reasons including:

• Materials inflation – due to lack of availability
• Labour pressures – especially sourcing trades for specialist works to historic properties
• Regulatory uplift – complying with more rigorous and complex building regulations

Dangers of index linking

Most buildings insurance policies apply index linking. However, this only protects policyholders if the original declared rebuild value was accurate in the first place. I frequently come across situations where people are unable to trace where the original figure actually came from. In simple terms, if you have to look that far back to find it, it likely means the figure is outdated and it’s time to review it again.

Improvements

I see many instances when people have genuinely forgotten to notify their insurers of recent improvements.

Improvements such as extensions, conversions, remodelling, new PV panels, heating upgrades to renewables, etc. all frequently go unreported to insurers. Failure to update the declared sum insured clearly increases the risk of being underinsured.

Don’t risk being under insured

The Financial Ombudsman Service has seen a substantial increase in buildings insurance complaints in recent years, with underinsurance forming a growing trend.

We have recently encountered instances where insurance companies refuse to settle the full amount of the claim because the policy holder is underinsured. This can make for an unwelcome surprise and potentially invalidate the claim, so do not let this happen to you! Remember, you do not get any forewarning of a fire, flood, or storm damage, and it is therefore essential that you know you are up to date and adequately covered.

How can we help

Our expert team of chartered surveyors is well equipped with the knowledge, market insights, and resources required to provide you with an accurate valuation of your property’s reinstatement costs.

Whilst it may be tempting to guess, it’s clearly false economy to underestimate your reinstatement value. If you needed to make a claim, how would you make up the outstanding deficit if a situation actually arose?

For more information or to contact us to discuss further, then please call Robert.