Is yours one of the 20% of households at risk of under-insurance?
Wednesday, 14th February 2024
Surveying
Having buildings insurance for your home or residential investment is clearly a no brainer, but how much thought do you give to the cover needed when you set up or renew a policy?
It is essential when setting up a policy that you make sure that the sum insured under the policy is accurate.
Whilst over insurance is not the end of the world, you don’t really want to be paying too much for that cover as can often be the case if you make the error of insuring at the value of the property.
However, it is under insurance that needs to be the real concern. Your insurance company can reduce the level of payout or refuse a claim if you do not set up a policy with a suitable level of cover.
The Association of British Insurers report that 20% of residential property is under insured.
High levels of construction inflation continue to mean that this figure is rising as a high proportion of people do not re-assess their cover when renewing their policy.
Very often an assessment is undertaken when purchasing. However, due to inflation, the RICS and the Association of British Insurers recommend a professional assessment at least every 3 years.
It must also be considered when undertaking significant alterations and extensions to your property. For example, we have recently been involved as party wall surveyors with a scheme of alteration to a middle of terrace two storey house in North London undergoing a fairly typical loft conversion, with side return and rear extensions. The alterations meant that the floor area of the property increased, plus there was the addition of various facilities to include a cloakroom, ensuite shower room, installation of an alarm system and upgrading external landscaping. If the sum insured were not re-calculated, the client would have gone on to be 30% underinsured. This can easily be overlooked when you are focused on planning, building regulations, party wall procedures and contractors. Combine this with a previous under-insured figure and the exposure to the risk of under insurance is worrying.
Our Building Surveying team regularly take on projects to help clients with reinstatement projects funded by insurance following fire, flood, storm, impact and subsidence damage. No matter the marketing reassurances, we know that the very first step an insurance company will take with a claim is to check the level of insurance cover that your policy provides.
Our recent experience of flood damage claims in Paddington, Maida Vale and Barnes following the flash floods in 2021, as well as some recent fire damage claims in Chalk Farm and Putney, resulted in claims varying between £30,000 and £250,000. It can be seen that the potential loss as a result of under insurance in these situations is considerable.
In the example given above of a house extended in a typical fashion, a serious fire damage claim of say £200,000 would mean a shortfall of £60,000 without an appropriate increase in cover, or worse if cover were refused.
The potential impact of a shortfall can be magnified in a property where there is a block policy for a number of flats, so if you are a managing agent or a director of a self managed block, you also need to take care to ensure adequate cover is provided.
The upset of having to see the contents of your home destroyed and then moving out for an extended period of time is stressful enough without having to face the prospect of finding £1,000’s of pounds to cover an insurance shortfall.
So, if you are purchasing a new property, manage a property, making extensive alterations, submitting a claim or simply have a policy renewal coming up, you need to take appropriate professional advice.
This is where we come in. We can provide a professionally prepared and calculated reinstatement cost assessment, also often known as an insurance valuation. This involves a site visit to take measurements and other information about the property, then crunching the data through an industry standard software system to produce a report with a recommended figure that will stand up to insurance company scrutiny.
If you would like some advice, then please call us on 020 7183 2578 or send your enquiry by email.
