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Building Insurance
With substantial increases in building costs we would advise all homeowners to re-examine their insurance values regarding their property.
Your insurance policy for your property will be based on a value that should reflect the full rebuilding costs in the case of a total loss. Should you be underinsured then an insurance company will almost certainly “average” your claim. For example whether your costs are based on a partial or complete rebuild after a loss, if you are underinsured, then you will be paid at a reduced amount.
ie; House insured for £400,000, actual rebuild cost £500,000 – you are underinsured by 25%.
Your claim is for £120,000 – your claim could be “averaged” and you will only receive £90,000 for the loss.
The Building Cost Information Service has stated that in the year from November 2021 the rebuilding cost index for residential property has risen by 18.6%. This could mean many properties are currently underinsured.
An annual increase is applied by insurance companies to the value of your property from when it was first insured with them. In the past this annual increase has kept pace with increased building costs, but with current unprecedented increases it is likely that many policies will have fallen behind the actual rebuild costs.
Various factors will affect the rebuild cost of a house, but it is usual to calculate costs on a square meter basis. The type and quality will also of course have a bearing on the final figure.
Please contact us for further information.