You can’t wrap your house in bubble wrap to protect it, but having home insurance will go a long way to help you deal with any damage caused to your property. Insurance, however, can be a tricky beast to get right.
The Guardian recently reported on a house fire where the family lost their property entirely and now are battling with their insurance company to claim the rebuild cost. Their insurance company is not accepting full liability of the rebuild.
At the time when the insurance was taken out, the insurers had used the Building Cost Information Services (BCIS) from the Royal Institution of Chartered Surveyors (RICS) to calculate the rebuild cost. A common practice across the profession and generally accepted as providing an accurate quote. However, the family were not advised at the time by their insurance company that they might be underinsured, nor to obtain a rebuild valuation from a chartered surveyor.
We wanted to highlight this issue and give you advice how to avoid this happening to you.
What is the rebuild cost of your property?
When you are taking out home insurance you will be asked to calculate your house rebuild costs. The rebuild cost is the lump sum you need to rebuild your house from scratch. The cost includes the price of labour and materials that is needed to build an identical house to replace the destroyed one. The rebuild lump sum is likely to be less than the
market value of your home if you were selling it.
It is important you know the rebuild value of your property to prevent you being in the same position as the family in the article. It also ensures that you aren’t either over or underinsuring your house.
If the rebuild figure is not correct you may end up having to pay the difference in price which could amount to a lot of money. In the case of the family in the Guardian article, they are looking to have to settle £465,00 difference.
1. Use the rebuild cost calculator from RICS as a general guideline
To use the calculator from RICS you need to know your home’s external floor area. However, the calculator will only give you a rough idea of your home’s rebuild cost and the website provides general guidance only.
2. Use a professional surveyor to obtain an accurate and up to date cost
To avoid the issue the family mentioned is dealing with, we would advise you to use a professional chartered surveyor to provide you with the rebuild cost. You will be paying around £250.00 for the survey, but this is the best way to get an accurate rebuild cost and prepare a professional Rebuilding Cost Assessment.
3. Ensure your home’s rebuild cost is up to date
If you have made any improvements to your property such as new extension or loft conversion, be sure to inform your insurance company. Your property’s rebuild value will now be more than it was when originally insured. By failing to inform your insurers of improvements to your home, it could mean that if anything was to happen to your property, you will be left with covering the rebuild cost difference yourself.