If you’ve ever insured a property, you’ll know that arranging buildings insurance is not based on your property’s ‘market value’, i.e., the amount it would sell for today, but its ‘rebuild costs’.
This is the amount of money it would cost to rebuild or reinstate your property from scratch, if it were to be completely destroyed by an insured peril.
Insurer only pay out the amount you have insured the building for so if you wrongly estimate the sums insured, and your property needs extensive rebuild work, you would not receive a big enough payout. Smaller claims will also be reduced by the percentage your building is deemed underinsured by. This is known as the average clause.
Thankfully, most standard home insurance policies now provide an automatic upper claims limit, so the need to set a sum insured is not required. Nevertheless, is the automatic limit adequate. Some insurers give £500,000 which may still not be enough.
Whether you’re a homeowner or a landlord with commercial and/or residential properties, it’s important to get the sums insured correct. Here are some tips for getting your rebuild value sums correct:
Consider all the variables
It’s not just the size of your building which dictates its rebuild cost. Though this will impact the amount of materials used, you also need to consider what they are – is it constructed from any specific or unusual materials? Does the location make it more difficult to access? Also consider the building’s style, quality and location. Don’t forget to include the cost of labour, which will depend on the size of the project and how long it would take to rebuild from scratch.
Changes in UK building regulations and stricter environmental laws may well mean your buildings would cost more to rebuild today than when you first insured them. Other geographical factors also make a difference – rebuilding costs will differ in the north from in the south, for example.
Listed buildings, landmark buildings and those otherwise ‘outside the norm’ would need the attention of specialist construction workers and therefore need to be assessed on-site by experienced valuers.
Get expert advice
No matter the type of building you own or what it’s used for, an assessment by a professional surveyor is the most accurate way to arrive at a sum insured. This gives you the peace of mind that your insurance would provide the total rebuild cost if it was ever necessary. You should also revalue your buildings at regular intervals.
We are able to put you in touch with a Chartered Surveyor, and can give further advice on arranging accurate Buildings Insurance. Get in touch with our experienced team to find out more.