The £1million question… is it enough for buildings cover?
Many home and property insurance policies provide a standard £1 million worth of cover for buildings. But is this now enough to cover rebuilding your house, given rising costs in construction and materials, and should you be concerned?
The simple answer to this is that every property is different and the amount you should be covered for varies per property. To answer this question, you need to know your individual property’s rebuild costs which means having a professional assessment. Certainly, there are issues of which you should be aware when arranging buildings insurance.
The average clause
When it comes to property, if you don’t get the sum insured correctly, you may not be fully covered. This may result in you being underinsured and the insurer invoking the ‘average clause’.
The ‘average clause’ works in this way: if you don’t have enough insurance in place to cover the full rebuild cost, the insurers will look at the percentage by which you are underinsured and only pay out this percentage of any claim you make. So, if you’re only insured for 75% of the rebuild costs, you may find the insurer will only pay out for 75% of the claim. In the case of a property rebuild, this could be a substantial amount, which could leave you seriously out of pocket.
Standard cover is no longer enough
Many policies have traditionally provided rebuild cover for up to a standard amount, known as blanket or bedroom-based cover, quite often £1 million. This would have been adequate in the past and was seen as ‘more than enough’, but today, it may fall short. Given the significant rises in rebuild costs over the past few years, this standard blanket coverage may not now provide adequate protection.
Rather than apply the Average Clause, which reduces the level of the claim paid out, some insurers may choose to cancel the policy, leaving property owners without any payment at all. This is currently leading to an increase in claims disputes, with some insurers saying they would never have offered cover in the first place had they known the true rebuild costs of the property.
As a result of rising rebuild costs and an increase in claims disputes, those cases where the policy provides £1m blanket cover are being looked at more closely by loss adjusters, and, in some cases, policies are being reviewed.
The solution
Given the rise in construction and rebuild costs, the level of blanket cover being provided may need to be readjusted. In the meantime, as a homeowner, it’s important to ensure you have a positive outcome should the worst happen.
This means not assuming your blanket coverage provides adequate protection and talking to your broker. If it is appropriate, you may wish to consult a rebuild professional who is regulated by the Royal Institution of Chartered Surveyors (RICS) and can correctly assess the rebuild cost of your property. This is the only way you can be sure a building is insured for the right amount.
We can arrange a Rebuild Cost Assessment Survey with one of our business partners, at preferential rates, who will check the accuracy of your Building Sum Insured. This will assist in avoiding underinsurance and insurers applying the Average Clause.
They can arrange a site visit to fully assess your rebuilding cost, or alternatively arrange a remote Desk Top Survey.
To discuss any aspect of your home contents and buildings insurance - whether you require a quotation, renewal, advise of any changes or more information on the rebuild cost assessment service - please talk to TMD and we will be pleased to help. Call TMD on 01992 703 000 or email us at insurance@mcdonaghs.co.uk