More than an over and under – Underinsurance on Buildings & Contents

Charlotte Clayton, Account Handler at County has recently created a contents calculator for clients to assess their sums insured. In this article she talks about the perils and pitfalls of underinsurance and what clients can do to avoid it.

During my first year at County I have come across many different opinions and attitudes to sums insured on buildings and contents. Often clients tell me they don’t have a clue or are just going by what their current insurer has on the schedule. This inaccuracy can lead to a perilous position in the event of a claim and the Schemes team and I are on a mission to make it right!

Buildings sums insured are often on an unlimited or index linked basis that was first set when clients took out mortgages. While many rely on annual indexation or inflationary increases of sums insured, that just doesn’t cut it anymore. In fact, we did a whole article on this a few months ago. The same goes for contents which people have viewed on a “what is it worth?” basis rather than a “what does it cost to replace?” ideal.

For new and existing clients we’re encouraging them to take up both:

  • Our free contents calculator. This will help prompt discussion with your household over the true cost to replace your prized possessions.
  • A Rebuild Cost Assessment to give an accurate, surveyor backed rebuilding cost of the property. This costs £137 for upto 5 buildings at one location

The free contents calculator is there to help give a running total of household items and help you set a more accurate sum insured. Having spent over 7 years in insurance I’ve tried to collate a number of scenarios, items and things to consider in the calculator.

Contents are insured on a Replacement basis, i.e it’s new for old or an amount to replace as new. This is the most common form of insurance for household contents. Insurers may use Indemnity (or market value) in very rare circumstances.

When using the contents calculator, you need to make sure the figures you input are to replace items, not just what they are worth as they stand. This is a common pitfall when we conduct client reviews or have received a claim; clients tend to just see the value in front of them, not the value in the shop when its brand new.

Similarly, valuables within contents can fluctuate in value – fashion, specialist markets and trends all affect prices of gold, silver, jewellery and watches and any other antiques or curiosities. . Make sure you get these valued once every 5 years to ensure they stay in keeping.

For our Rebuilding Cost Assessment we have been using our partners at Rebuildcostassessment for nearly 2 years and have had good feedback reports from their work. Using RCIS registered surveyors, digital imagery for measurement of buildings and regional cost databases, their reports can give an accurate and backed guarantee of rebuilding cost. These give policyholders a report of homes without the full need for a site visit or lengthy measurement processes. For those with homes that would still benefit from a site visit they can still offer this – prices would be available on request.

We definitely recommend a professional building valuation/assessment but if you still decide to value the rebuild yourself, then 5 key points to consider are:

  • Rebuilding cost isn’t the same as the sale price or price at auction – it’s the bricks and mortar cost to rebuild a property each step at a time
  • The cost should reflect debris removal and site clearance to ensure it’s like a ‘clean slate’ for rebuilding
  • Labour and materials are only one part – professional fees, installation of mains services and landscaping would also factor in to the rebuild costs. Insurers will pay all of these fees so long as they are included within the sum insured
  • How is the access to your property? If it involves road closures, additional shipping or traversal to it then these costs need to be added in addition.
  • Make sure you’re aware of the variable rates or rebuild in your area – rebuilding a property in Oxford will have a different cost compared to neighbouring Northamptonshire, Warwickshire or Aylesbury Vale.

When putting together our policies we want to make sure they respond in the event of a claim. If there’s under insurance or no specific mention of some items of contents then this can lead to a delay in settlement or an insurer reducing the claim in proportion to the amount under insured.

For further info or to request a quote for a Rebuild Cost Assessment, please call 01865 290913 and ask to speak to the Schemes team.