Most people will be aware of the need to insure their home and to make sure that the building sum insured under the policy is adequate, but what is the rebuilding cost for home insurance purposes, whos responsibility is it to make sure that the sum insured is adequate and what help is available to assist in this?
What should the sum insured for the rebuilding cost include under a home insurance policy?
The sum insured under the home insurance policy should represent the rebuilding cost of the main property, including the cost of demolition, site clearance, surveyors’ and engineers’ fees and the costs associated with complying with local authority requirements.
Who is responsible for making sure that the home buildings sum insured is adequate?
The policyholder. It is not the responsibility of your insurance company, broker or even a professional valuer to ensure that the sums insured is correct, it is the policyholders. If you do obtain a professional valuation for insurance purposes and it proves to be incorrect in the event of a claim you may be able to sue the valuer in respect of their professional negligence but it remains your duty to ensure the sum insured is incorrect.
In certain circumstances, some insurers will undertake a survey or provide a valuation and will guarantee not to apply an under insurance clause. This does provide you with the surety that your sum insured is adequate but this feature is not generally available on standard household insurance products.
What happens if my buildings are under insured?
In the event of a claim an insurer may apply an under insurance clause that will state that the claim will be paid in the same proportion as the sum insured relates to the true building cost, alternatively they may seek to settle any claim making a deduction for wear and tear. In some cases it may be a condition of the policy that you ensure the sum insured is correct and failure to do so could potentially invalidate your insurance leaving the insurer with the opportunity to possibly negotiate a reduced settlement as an alternative to voiding the policy.
Should I insure my home for the market value?
No. This is a common mistake and is a totally inappropriate way of arriving at the correct sum insured for your home insurance. The market value has no bearing whatsoever on the cost of rebuilding the property. In many cases the rebuilding cost will be significantly less than the market value and in other cases significantly more.
Should I insure for the rebuilding cost requested by the building society?
You should check that this figure represents the full rebuilding cost and is not merely a figure suggested by the building society in order to protect their financial interest in the policy. You should certainly regard this figure as a minimum sum insured.
Where can I obtain help in calculating the rebuilding cost for home insurance purposes?
The Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors (RICS) provides an on-line calculator to assist you in calculating your sum insured. Whilst this does not provide you with any guarantees it is certainly a wise option to regularly check this, perhaps once a year when your policy is due for renewal.
What should I do if my building sum insured is inadequate?
You should contact your broker or insurance company immediately and ask them to make the necessary adjustments. Do not wait for renewal of the policy,
How do I buy home buildings insurance?
You can buy home insurance buildings cover from a wide range of brokers and providers, you can apply on-line at our web-site or call us direct to speak to a broker about your requirements.