Property Insurance UK – How Much to Insure your Building For?
One of the biggest problems relating to the insurance of Home buildings relates to the sum insured, this is the actual figure or amount that is listed on your schedule of insurance and is the maximum amount that an insurance company will pay out in the event of a claim. However, many people have problems in calculating their sum insured and there is a lot of confusion relating to what amount to state.
The main area of confusion relates to the relationship between the market value of the property and the rebuilding or reinstatement cost, basically there isn’t one. The market value of the property takes in to consideration such factors as property age, location, desirability etc whereas the rebuilding cost is solely based on the amount of money required to rebuild the property, should it burn to the ground for example.
The rebuilding cost is often much lower than the market value of the property particularly if the property is in a very expensive area such as London. Many people do not like insuring for the lower amount as often the difference is vast and they feel uncomfortable at the prospect of not having the correct sum insured. There are a number of ways that you can arrive at your building sum insured:-
1) If you have a mortgage on the property, calculating the true rebuilding cost may be academic, the lender will survey the premises and their surveyor will advise the sum insured required. Often lenders will request a sum insured that is higher that the actual rebuilding cost but as they are lending money and want to secure their investment, you will have to accept the amount that they request.
2) If you do not have a mortgage, you can select your own sum insured quite accurately by visiting the Association of British Insurers website and using their rebuilding calculator. This is a very easy process but you will need to take measurements.
3) You can instruct a surveyor to carry out a survey at your premises, advise that you only want a figure to establish rebuilding costs of the property. If you are having a survey carried out anyway, ask that this should include an amount for rebuilding costs.
When you have arrived at your building sum insured and are about to buy your building insurance policy, make sure that you select an insurer that will provide you with an indexed linked policy. This will help protect you against underinsurance as your sum insured will be linked to the cost of inflation.
It must be remembered however that even with an index linked policy, you are not guaranteed to have the correct sum insured year after year, if you make improvements to the property such as new windows, an extension or even a conservatory, you should make an adjustment to you sum insured to ensure it stays up to date.
The problems relating to the correct sum insured are further increased if you building is unusual in design or is a listed building. These types of property need special consideration particularly when certain building techniques have been employed and by statute you are obliged to reinstate the building in a a similar if not exact fashion.
By: Bob Andrews
About the Author:
The main area of confusion relates to the relationship between the market value of the property and the rebuilding or reinstatement cost, basically there isn’t one. The market value of the property takes in to consideration such factors as property age, location, desirability etc whereas the rebuilding cost is solely based on the amount of money required to rebuild the property, should it burn to the ground for example.
The rebuilding cost is often much lower than the market value of the property particularly if the property is in a very expensive area such as London. Many people do not like insuring for the lower amount as often the difference is vast and they feel uncomfortable at the prospect of not having the correct sum insured. There are a number of ways that you can arrive at your building sum insured:-
1) If you have a mortgage on the property, calculating the true rebuilding cost may be academic, the lender will survey the premises and their surveyor will advise the sum insured required. Often lenders will request a sum insured that is higher that the actual rebuilding cost but as they are lending money and want to secure their investment, you will have to accept the amount that they request.
2) If you do not have a mortgage, you can select your own sum insured quite accurately by visiting the Association of British Insurers website and using their rebuilding calculator. This is a very easy process but you will need to take measurements.
3) You can instruct a surveyor to carry out a survey at your premises, advise that you only want a figure to establish rebuilding costs of the property. If you are having a survey carried out anyway, ask that this should include an amount for rebuilding costs.
When you have arrived at your building sum insured and are about to buy your building insurance policy, make sure that you select an insurer that will provide you with an indexed linked policy. This will help protect you against underinsurance as your sum insured will be linked to the cost of inflation.
It must be remembered however that even with an index linked policy, you are not guaranteed to have the correct sum insured year after year, if you make improvements to the property such as new windows, an extension or even a conservatory, you should make an adjustment to you sum insured to ensure it stays up to date.
The problems relating to the correct sum insured are further increased if you building is unusual in design or is a listed building. These types of property need special consideration particularly when certain building techniques have been employed and by statute you are obliged to reinstate the building in a a similar if not exact fashion.
By: Bob Andrews
About the Author:
At Assetsure.com you can find out more about home building insurance uk and understand some basic building contents insurance principles.
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