Make sure you're not under insured
Oct 26, 2011
Recent research by independent valuer Barrett Corp and Harrington states that 77% of properties it valued were underinsured by around 55%. This could mean that business and homeowners may find themselves underinsured.
Under-insurance occurs when the amount for which the property is insured, is less than the amount it would cost to rebuild such a property. It is important to insure your property for its replacement value, not the purchase amount or market value.
The recession has led to significant reductions in the market value of buildings. This has led to some property owners questioning whether there has been a similar reduction in reinstatement values and whether building sums insured should be similarly reduced. However, whilst property owners may be looking for savings in these troubled times, it is important that this is not at the expense of insurance cover.
Make sure your building is not under-insured
- What cover do you have? Find out exactly what level of cover you currently have for your property, if you're unsure speak to your broker.
- Count the cost of a rebuild – when you get a quote for home insurance you may be asked to specify a 'rebuild cost' - this represents how much it would cost to completely rebuild your home, including materials and labour. This will vary according to the size, age and type of property you have, and can be a key area for being under-insured. The Association of British Insurers has a useful buildings rebuild cost calculator for residential properties here. Alternatively for a more accurate valuation you may wish to employ the services of a professional surveyor.
- Keep your insurance up to date – it’s usually a good idea to review your buildings insurance cover at least once a year, perhaps when you receive your insurance renewal or if you have made any alterations or home extensions.
Contents Insurance
Under-insurance can also be an issue with contents insurance. It is important that you are sure that the levels of cover specified within your insurance policy adequately reflect your belongings. A few things you may wish to consider are:
- Compile an inventory - go around your property on a room by room basis and list the items within that room and their likely replacement value. Add these amounts together to check whether your sum insured is adequate.
- High Valued Items - in a previous story we explained that the values of jewellery have doubled over the last 10 years. Your insurer may impose single item limits within your policy making it important that you specify any high valued items separately if necessary
- Regularly review - it's important that you review your home insurance on a regular basis, for example if you receive expensive Christmas or Wedding presents or have a January sales shopping spree you may need to update your cover.
