Many building insurance claims are settled with both parties content, but in others, people have found their buildings insurance covering less than they thought it would. This is due to a problem known as underinsurance, a problem far more prevalent than it really should be.
Underinsurance happens when a property is valued at less than its true worth when being insured. This can lead to a lower premium, but also to a gap in the pay-out should the worst happen. And when the worst is on the scale of a building, that gap can be worryingly large.
What’s the risk?
If the claim is only for a partial loss, the average level of underinsurance can get lost. But what happens when a catastrophic total loss occurs? When you’re staring at a pile of rubble, the gap begins to look a lot more serious. Especially if you don’t have funds set aside to cover massive upsets such as this.
In general, the consequential financial risks of underinsurance simply aren’t worth taking. By taking out an insurance policy in the first place, you have shown you want to protect your investment, ensure unexpected disasters won’t cripple you financially, and most importantly give yourself peace of mind.
But none of those things will be true if your policy is underinsured. When you take out your buildings insurance, make sure your property is valued at its true worth. If you don’t wish to find someone yourself, make sure you are working with a broker who you trust, and who has a reputable surveyor to assess your property. We offer this level of service to all our clients, so if you aren’t sure, give us a call.
Put simply, a professional valuation is an assessment of the cost to yourself of rebuilding in a ‘total loss’ scenario. Generally it’s a good idea to have this done once every three years, as the cost of rebuilding will change over time. If you haven’t had this done recently, or have just let your current insurance policy roll on, it might be worth a call to us to check you are actually still protected.
Even if your property was surveyed, it’s possible certain aspects were missed. For example, these factors can have a significant impact on the cost of a rebuild:
- Debris removal costs
- Architects and surveyors fees
- The cost of meeting local authority requirements in the event of re-build
VAT is a complex area and some valuers will not include this evaluation or suggest reference to an accountant or insurance professional for advice. Again, this is a good reason to use a broker you trust. Should the VAT not be taken into account, or if other complications arise because of it, you could find yourself facing an even greater shortfall.
In short, underinsurance is an easy thing to miss, and an easy thing to fix if caught before it matters. Give us a quick call if you’re unsure, and we will take care of the rest.