{"id":286290,"date":"2025-06-10T18:31:00","date_gmt":"2025-06-10T18:31:00","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/insurance\/why-your-home-might-be-underinsured\/"},"modified":"2025-06-10T18:31:00","modified_gmt":"2025-06-10T18:31:00","slug":"why-your-home-might-be-underinsured","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=286290","title":{"rendered":"Why your home might be underinsured"},"content":{"rendered":"


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According to BCH Ltd, a professional buildings insurance valuation service, 75% of the buildings that they survey are underinsured<\/strong>. Similarly,\u00a0RebuildCostAssessment.com\u00a0<\/a>advise that two thirds of properties are underinsured and are normally covered for less than 70%<\/strong> of their correct rebuild cost. <\/p>\n

But why is this important?<\/em><\/strong><\/p>\n

Having the correct buildings sums insured for your home is important for three reasons:<\/p>\n

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  1. There might be a shortfall in the event of a claim<\/strong> because the insurer may apply the\u00a0average clause. This means that if your property is insured for \u00a3700,000, but the actual cost to rebuild it is \u00a31,000,000 then the insurer will reduce the claim by 30%. In the event of a major incident you may face a shortfall of \u00a3300,000 but, importantly, this clause also applies to\u00a0any claim.\u00a0So, if you make a \u00a310,000 claim you may only receive \u00a37,000 \u2013 even though the claim amount is well below your sums insured.<\/li>\n
  2. Your claim might be disputed<\/strong>. If the insurer deems that you have deliberately or \u2018recklessly\u2019 underinsured then they may refuse to pay a claim completely. There are ways to manage your home insurance premium safely, without underinsuring.<\/li>\n
  3. There may be a delay in rebuilding your property<\/strong>. It\u2019s a homeowner\u2019s responsibility to set the buildings sums insured \u2013 and it\u2019s important to remember that there is no direct correlation between the market value of your home and the rebuild costs.<\/li>\n<\/ol>\n

    How the economic climate can impact your buildings sums insured<\/h2>\n

    Rebuild costs have increased because of higher demand and lower supply caused by Covid-19 and Brexit. And the ongoing conflict in Ukraine has resulted in a shortage of raw materials such as timber. Furthermore, energy costs associated with producing building materials, including bricks and plasterboard, have also risen significantly.<\/p>\n

    Since Brexit, Sterling has dropped against the Euro. So, for example, the cost of importing materials from European countries has risen. All this means that the cost of rebuilding your home is increasing.<\/strong><\/p>\n

    Although insurers\u00a0index-link sums insured\u00a0to keep up with higher costs, according to the ABI it\u2019s failing to keep up with the above inflation rises in the cost of many building materials. Therefore, if you haven\u2019t already done so, we recommend that you review your existing buildings sums insured.<\/p>\n

    What factors do I need to consider when setting my buildings sums insured?<\/h2>\n

    The buildings sums insured is the rebuild cost and it will vary according to the size, age, location, and type of property you have. Here\u2019s what you need to consider:<\/p>\n

    1. Rebuilding your home<\/h3>\n

    The buildings sums insured is essentially the amount it would cost to rebuild your home from scratch. This includes:<\/p>\n