Could Your Home Be Underinsured?
How would you manage if you had to pay for a large part of your home repairs after fire or storm damage? And why, despite having home insurance could you find yourself having to foot the bill for the shortfall between your insurance payout and the rebuild cost itself?
A Fresh Perspective
In 2021, 80% of UK properties were underinsured.1 In 2024, 82% of residential properties are now underinsured.2 According to professional rebuild cost assessors Rebuild Cost Assessment Ltd., underinsured buildings were only insured for 63% of what they should be covered for.3 That means there is a 37% shortfall in the sum insured for these properties.
Why could your property be underinsured?
Market Value vs. Rebuild Cost
The cost of a property rebuild is not usually the same as the market value of your home. For example, the rebuild cost for an average home in the UK was £300,000 in 2023 but in 2018 it was around £194,000.4 If you are insured for £194,000 when it should in fact be £300,000 you could be at risk of having claim amounts reduced and funding the shortfall yourself, or even in some instances having your claim rejected.
Why Are Rebuild Costs So High?
Brexit led to loss of workforce and supply chain issues, which in the face of high demand for building projects, raised prices. The invasion of Ukraine has contributed to the high cost of raw materials which have contributed to rising construction costs. Even now that inflation has slightly cooled, it is advised that you get your property assessed for the rebuild value and that this undertaken every five years.5
When calculating a rebuild cost, you will need to consider:
- Demolition & debris removal
- Plumbing, gas, electrics & lighting
- Professional fees: architects, surveyors, structural engineers
- Cost of materials: steel, brick, concrete, wood
- Specialised construction materials, for example, in older properties
Are you aware that you could be underinsured?
If you have renovated your home, or installed an extension, the rebuild cost may be higher than your original rebuild cost. By informing us of any changes to your property, we can adapt and update your policy and sums insured to match the increased rebuild value of your home. Your annual premiums might rise to reflect the increased value, but underinsuring your property can have far-reaching negative consequences.
Mitigating the risk of being underinsured
Firstly, get a rebuild cost assessment. Companies specialising in rebuild cost assessments such as Rebuild Cost Assessment Ltd. provide desktop and site assessments. A Desktop Assessment uses advanced technology and in-house expertise to produce an accurate rebuild cost without a member of the team visiting your property and is a more affordable option at just under £200.6
If you own a home that is listed, is a non-standard construction, has an unusual feature, or you prefer to meet your rebuild cost assessor in-person, a Site Assessment might be more suitable. You can also get your first rebuild cost assessment with an on-site visit and conduct further updates through desktop assessments.
Secondly, talk to us. When you have established your rebuild cost, we can check your policy to see whether your sums insured match your most up to date rebuild cost and adjust your policy accordingly.
Overall, the dangers of underinsurance on a UK property are significant and can have far-reaching consequences for property owners. If you’d like further advice on your home insurance policy, talk to us.
Alternatively, email:
info@lloydwhyte.com
What matters to you, matters to us
- -3. https://www.rebuildcostassessment.com/
- https://www.gocompare.com/mortgages/house-price-predictions/
- https://insurance-edge.net/2023/11/23/house-rebuild-costs-are-through-the-roof/#:~:text=The%20Building%20Cost%20Information%20Service,by%20%C2%A3106%2C000%20since%202018.
- https://www.rebuildcostassessment.com/desktop-assessment
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