How Much Will Your Home Insurer Pay If You Make A Claim?

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.

An independent valuation company has found that 87% of all the properties they survey are underinsured and that on average the buildings sum insured needs to be increased by 55% for them to be adequately covered.

What this means is that whilst 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.

The market value should not be used as the insurance value – the two can be wildly different…either way.

What can happen?

So, to take an extreme example, if you insure your home for £400,000 but the true rebuilding cost should be £600,000, and then made a claim for flood damage costing £30,000, the insurer could reduce the amount they pay down to £20,000 as you have only insured for two thirds of the cost!  The same can happen on a contents insurance claim

What to look out for?

Whilst there are online sum insured calculators, these only work 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.

Is there a solution?

There are several!

1. Talk to a broker (like us) who can give advice and guidance – some insurers offer free appraisals to help clients insure for the correct amounts.

2. Take advice from a surveyor.

3. If you are a homeowner, go around your house room by room, listing each item and give each one a replacement cost. It can take a little time but you will be surprised at the resulting total!

4. Engage a specialist valuer. There are plenty around, specialising in domestic and commercial properties. Call us if you need a name.

What about my premium?

Yes it may cost a more to insure for the full amount, but doubling your sum insured for example would not double your premium. And don’t forget, the premium is still tiny compared to what that shortfall might be!

 

Need Help?

Call us on 01527 834696