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Home Insurance - The Dangers Of Underinsurance?

Over the years there have been numerous surveys to gauge the level of underinsurance in the UK. Recent data suggests that 70% of homes are either over or underinsured. This means that your household property may not be covered for the right amount. The implications of this can be extremely costly, sometimes so costly you could lose your home.

Why may I be underinsured?

Usually it is not deliberate, but the cost of replacement is simply underestimated. Buildings sums insured should reflect the rebuilding cost and not market value – this is a common mistake and whilst it can lead to an over valuation, with older properties it is frequently insufficient.

Properties in a conservation area, older or listed buildings – do not just assess the cost of replacement with modern materials, partial damage to an older building may involve using original materials, especially for listed buildings.

Buildings sum insured should include: internal features, foundations, boundary walls, outbuildings, consultancy fees such as architects, debris removal costs and the cost of complying with up to date building regulations.

The implications

Underinsurance can have severe consequences. This is because insurers have something they call the ‘ average clause’ .Here is how it works:  Lets say your property is insured for £500,000, but the actual cost to rebuild should be £1,000,000. Any insurance claim you make for the property could be reduced by 50%. For some homeowners, a reduced claims payment as a result of under-insurance has meant they have had to downsize their property. Imagine losing the home you have spent years working hard to build up.

So what can you do?

The simple solution is to insure for the correct amount. Normally this involves finding a trusted expert who visits your home to complete a professional assessment. This can be both time consuming and expensive. However at ICB we have access to a unique low-cost online service. For just £102.00 (incl VAT) we can provide a comprehensive Rebuild Cost Assessment report without ever having to visit your home.

The report advises you of the rebuild cost of your property and gives guidance on what actions to take.

To enquire about this unique service please contact your Private Clients team where we will be happy to assist.

Paul Hollands – Cert CII
Director – Private Client Division

D: +44 (0) 208 282 8687