The £1million question… is it enough for buildings cover?
Many home and property insurance policies provide a standard coverage of £1 million for buildings. However, with the rising construction and materials costs, it's worth considering whether this amount is enough to cover the rebuilding of your house. So, should you be concerned?
The answer to this question is that the amount of coverage you need varies depending on your property. Each property is unique, and to determine the appropriate coverage, you must know the rebuild costs of your property. This can only be done through a professional assessment. Certainly, there are issues of which you should be aware when arranging buildings insurance.
The average clause
Ensuring that the sum insured on your property is accurate is important. If it is not, you may end up being underinsured and the insurer may impose the ‘average clause’.
The ‘average clause’ means that if you do not have enough insurance coverage to pay for the full rebuild cost, the insurer will only pay out a percentage of your claim equivalent to the percentage by which you are underinsured. For instance, if you are insured for only 75% of the rebuild cost, the insurer may only pay out 75% of the total claim amount. This could lead to significant financial loss, particularly in the case of a property rebuild.
Standard cover no longer enough
There has been a significant rise in rebuild costs, which has made the standard blanket or bedroom-based cover, traditionally provided by many policies for up to £1 million, inadequate. This means that property owners might not be receiving enough protection from their insurance policies.
Insurers might choose to cancel the policy instead of applying the Average Clause, which reduces the level of the claim paid out. This can lead to disputes between the insurer and the policyholder, with some insurers saying they would never have offered cover if they had known the true rebuild costs of the property.
As a result of the increase in rebuild costs and claims disputes, loss adjusters are scrutinising cases where the policy provides £1m blanket cover more closely. In some instances, policies are being reviewed to ensure that policyholders receive adequate protection.
The solution
With the increase in construction and rebuild costs, the level of blanket coverage provided may no longer be sufficient. Therefore, as a homeowner, it is important to take steps to ensure that you are adequately protected in case of any unfortunate event.
One should not assume that blanket coverage provides adequate protection and should consider talking to a broker to evaluate the level of protection. Additionally, if required, it is recommended to consult a rebuild professional who is regulated by the Royal Institution of Chartered Surveyors (RICS) to correctly assess the rebuild cost of your property. This is the only way you can be sure that your building is insured for the correct 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 NLIG and we will be pleased to help. Call us on 01992 703 300 or email us at insurance@nlig.co.uk