Being under insured can seriously hurt you!
Complete this form to find out your rebuild value ----------------->
You are sitting at home and it's howling outside, the wind has got up and it's blowing hard, couple of branches have come off next doors tree and landed in your garden. Thankfully no damage done, You go outside and pick them up and put them out the way so no one get injured if they get blown again. Next thing about a dozen of your roof tiles come off the roof hit the car and land all over the drive.
There is no way I can get up there and fix it and it's now started to rain and the rain is getting inside the roof. So you ring your insurers who get a tradesmen out straight await and he patches things up till tomorrow when he will have a good look at the damage, because it's dark now and too dangerous to carry out any further assessments.
He comes back the next day, finishes his assessment and explains he will send his invoice for the temporary repairs and the estimate for the whole repair to your insurers. In the mean time you notice that the water damage from the rain, the water has ruined your bedroom carpet and the walls are damp and patchy. So you ring the insurers and they get someone else out to provide an estimate for this part of the repairs. You are fine with this as the temporary fix to the roof has stopped any further water damage and is secure for the moment.
In the next few days the insurers have appointed their Loss Adjuster t0 assess the damage to your property and he completes a full report for the insurers of the damage sustained to the building. He also has a copy of your proposal form with him and knows the values you provided to the insurers for the building and your contents. The Loss Adjuster asks to see the rest of your property so he can assess if there is any further damage, but in doing so he is making an assessment of the rebuild value of the property and how much to replace as new the contents of your home. He goes away and explains he or the insurers claims department will be in touch with a view to settling your claim.
Few more days elapse and you ring your insurers maybe because you just want to know how thing are progressing as the temporary fix is a bit unsightly and you just want work to progress and get it finished, it's been a couple of weeks now. The claims department explain that the roof damage is going to be £5000 to fix and to replace the carpet and decorate the bedroom will be £2000 the total cost is £7000.
But their is a problem, the Loss Adjuster says that the rebuilding value of your property is £250,000 and your value for the building on the policy is £187000, this means you are 25% under insured. Also the cost to replace all your household contents as new is £80000 and the value we have on the policy is £40,000 so you are 50% under insured on the contents. As the property is 50 years old we also have to take into account a deduction for wear and tear on the building which we will apply as 50% deduction, this is because you are no longer entitled to new for old settlement due to the under insurance.
Our offer will therefore be £1250 for the roof and £500 for the contents minus your £250 policy excess which means our net offer to you will be £1500. But my claim is for £7000 I cannot get my property fixed for £1500. So who is going to pay the balance of £5500 to fix my house, well the short answer is;
How did this come about?
There are a few things to consider here, firstly who set the value for the building and when was this done? When the value was first put on the policy where did this information come from? When was the value of the building reviewed and was the previous insurance policies indexed linked in line with inflation?
As you can see from these questions, this looks a little complicated and confusing. But it doesn't have to be this way. Too many home owners and business owners under estimate the cost to replace their buildings and contents. When you first insured your property the valuation you got was flawed and as time passed this flaw in the valuation (rebuild value) is now going to cost you a few thousand pounds. Let me explain.
We will start with the building, insurers require a rebuilding value, this is the cost of materials & labour to rebuild your property, but also the cost of demolition, land clearance, capping off utilities, the cost of alternative accommodation for you and your family, contacting land registry and solicitors costs if there are any litigations elements to the claim. As you can tell this is where things can go wrong, because the rebuilding value is complicated. It is up to the policyholder to ensure that the rebuilding value is right, this is not the job of the insurance company. This is the bit of the equation the client has to get right and if you get this right everything else slots into place and claims get paid in full with no fuss.
At Crosby Insurance Brokers we have a computer system which calculates the rebuild value for you, all we need to know, is the year the property was built, how many bedrooms and how many out buildings like garages etc and the dimensions or foot print of the house in feet or meters. The system will then give us a lowest & highest rebuild value in which we can refine the value by adding extensions, conservatories, or if the building is listed either Grade 1 or 2. Or in a conservation area, all this information together with the materials used in the property construction will have a bearing on its rebuild value.
Remember what is important is the rebuild value and not the market value. Claims are settled by insurers on a reinstatement basis, that is to say, they will pay to reinstate your property as it was prior to the claim. The insurers are insuring the whole property and not just partial damage to the property, so they want to know the rebuilding value for the whole property and this must be right. Based upon this value they will then apply their premium to insure the whole property.
You may notice that the claim in my example is for partial damage to the roof & contents, and the total repair cost to the building was £5000, but the problem is that you told them the rebuild value for the whole property was £187500 which is 25% less than the correct value. As a consequence the insurers collected 25% less premium than the risk they were having to carry.They will regard this as a breach of contract due to misrepresentation and will not settle the claim on a reinstatement basis, but on an indemnity basis. Indemnity means they will deduct the percentage of under insurance and also make a deduction for wear and tear. In our example this was 50% but the deduction could be as high as 90% depending on the age of the property and the type of materials it was made.
This is what you need to do!
Contact our office on 0191 5657590 and ask for a rebuild valuation calculation for your property, you don't have to be insured by us. We will then advise you what the rebuilding value for your property or business will be.
We cannot offer this service for the contents of your property, as this differs from person to person depending on their tastes, some people are minimalists others like lots of stuff, some like expensive stuff and other do not spend as much. But we can send you a short check list for you to complete and then you will have the correct replacement value for your home or business contents.
So let our Insurance Experts help you be a smart consumer and help you get your insurance right.
Your home is probably the single most important investment for you and your family, so don't put it at un-necessary risk by being under insured, as the consequences are dire, it can be stress and heart ache at a time when you want things to go smoothly