Up to 10 million homeowners could be risking their property through under insurance, a new report claims.
According to UK insurer SunLife, 67% of homeowners don’t know the rebuild cost of their home, while more than a third (35%) have wrongly assumed it is the same value as their house.
When buying buildings insurance, it is necessary to know the rebuild cost of your home. This is the amount needed to completely rebuild your home if it is destroyed beyond repair.
Having an accurate figure can help prevent over or underinsurance. If you over insure, you could be paying out hundreds in unnecessary premiums, but the consequences could be very serious if you underinsure.
Simon Stanney, director of insurance at SunLife, said: “In the unfortunate event that your home requires a complete rebuild and your buildings insurance is not sufficient, you will be left to cover any difference in price. Worse still, if your property is mortgaged you could be left with no home and thousands to pay back to your lender.”
The best way to get an accurate rebuild cost is to get a surveyor to carry out detailed measurements of your house and then prepare a professional rebuilding cost assessment, which costs around £250.
“However, only 8% of homeowners do this – most people either don’t want to or cannot afford to spend this kind of money. Therefore, many either look at calculating the rebuild cost themselves (22%), or just leave it, hoping the insurer will estimate it for them (30%),” said Stanney.
One online tool available to homeowners is the rebuild cost calculator from RICS http://abi.bcis.co.uk/ but you will need to know your home’s external floor area for both upstairs and downstairs as well as what it is made from, the type of house and how old it is.
The other way to avoid the issue of over or under insurance is to shop around for a policy that doesn’t ask the question and offers buildings insurance with a standard rebuild cost cover.
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