Calculating your Rebuilding Costs
At Assetsure, we are often asked questions about how much a building should be insured for. Even though some insurers will give you a “blanket” sum insured, it is essential as the owner of a property that you are aware of its full reinstatement cost and the consequences if you do not insure for the correct amount. There are a variety of methods that you may use to obtain your rebuilding cost and we have listed details below.
Use an online calculator
Above you will find a link to an eternal website where you can obtain a sum for your rebuilding costs after you have input some basic details about your home. The service is free but you will have to complete a simple registration form.
The Building Cost Information Service (BCIS), part of the Royal Institution of Chartered Surveyors (RICS) produces a range of detailed guidance on the cost of rebuilding houses and flats. The Association of British Insurers (ABI) has commissioned BCIS to provide general guidance to help you check the adequacy of your sum insured. It should be remembered though that these online calculators will only give you an approximation as to your re-building cost and are no substitute for a professional opinion. If you under insure you may not receive the full amount you need to effect repairs following a claim.
Check with your Survey Report
If you have a mortgage on your property, there is a good chance that the sum insured required by your lender will be stated on the document. Check this document carefully but if it is more than a few years old you will want to make sure that the sum insured is still adequate. Once you have a policy in force, index linking will increase your sum insured each year.
Hire your own Surveyor
A full structural survey can be a costly document to produce but you could consider a smaller report that concentrates on rebuilding costs. This is undoubtedly the best way to make sure you have an accurate valuation and if you need help in locating a local surveyor click on the following link Local Surveyors
Under-insurance is a common problem that insurers encounter when dealing with buildings insurance claims. Essentially, under-insurance can be defined as a shortfall between the amount of cover requested at the time a policy is taken out, and the actual cost of replacement or rebuild following a loss. Although Index linking will increase your sum insured each year, if the initial figure is wrong, no amount of index linking will correct it.
Following a claim for an under insured building, insurers may choose to apply “average” to the claim, resulting in them only paying out a proportional amount. Most policies contain an average clause which comes in to effect at the time of a loss. Here is an example;
If you own a home which should be insured for £250,000 but you only insure it for £125,000 you are therefore only insuring 50% of the true rebuilding value, insurers would in turn only pay 50% of any claim. So, if you made a claim for £50,000 following a loss (a flood for example), insurers would only pay £25,000 and you would have to find the remaining £25,000.Most polices contain an average clause.
In certain circumstances insurers have been known to ‘void’ a policy (cancel from the start date) and pay nothing towards the claim at all.