Many people believe that insurance companies try to wriggle out of paying claims in full.  However, the truth is that their insurance has probably just been poorly arranged and the most common reason for a claim being reduced is due to underinsurance – not insuring for the full rebuilding cost of your home or the full replacement cost of all your contents.

There are two common misconceptions:

  1. Even though you are unlikely to ever suffer the total loss of your home or contents, it doesn’t mean that the insurer will pay “up to” the sum insured shown on your policy.
  2. The market value should not be used as the insurance value – the two can be wildly different…either way.

So to take an extreme example, if you insure your home for £250,000 but the true rebuilding cost should be £500,000, and then made a claim for flood damage costing £30,000, the insurer could reduce the amount they pay down to £15,000 as you have only insured half the cost!

Here are two things to be aware of that may help you to make sure your claims are paid in full.

First, have a look at the Building Cost Information Service website provided by the Royal Institution of Chartered Surveyors – www.calculator.bcis.co.uk.    It has a free rebuilding cost calculator but care should be exercised as the calculator only works for “standard” properties and there are a number of other factors that may increase the costs:

  • Listed buildings need special consideration and are more expensive to repair.
  • A property built of stone and/or with extensive stone boundary walls.
  • Pre 1920 properties often have more expensive features such as staircases and fireplaces.
  • The use of “green” features such as solar panels and bio-mass boilers.
  • A location which might be difficult for a contractor to access (e.g. on a narrow street, in a remote or busy location) could make delivery of building materials difficult and the erection of scaffolding costly.
  • The introduction of expensive features such as integrated audio/video systems, expensive bathrooms, hot-tubs or electronic controls.

Secondly, when it comes to your contents, take a little time on a wet weekend to go around your home room by room listing your contents and putting an approximate new replacement cost next to each item.  For antiques and fine art, use the current market value. It needn’t be to the penny but be honest!  As well as the obvious things like beds, TV’s and fridges, don’t forget carpets, curtains, clothing, crockery and foodstuffs!  You will be amazed at how high the final total is.