Buildings Sum Insured
- How are rebuilding costs calculated?
The Building Cost Information Service of the Royal Institute of Chartered Surveyors, which is entirely independent of the insurance industry, publishes a guide to rebuilding costs. This guide includes information on the rebuilding costs of different types of homes including the cost of features such as solid stone and timber framed walls as well as different types of roofing including thatched roofs.
A surveyor will measure the floor area of a home and then calculate its rebuilding cost taking into account its special features.
- How much should I insure my home for?
Homes are usually insured for their rebuilding cost as opposed to their market value.
The market value of a home takes into account such factors as its location, the value of the site, the size of the garden and the standard of the local amenities (such as schools and transport links). It is difficult to calculate a fair premium for different homes based on these factors as they can have a significant impact on value but without having an effect on the extent of the risk to be insured.
- Why are homes insured for their rebuilding costs when it is unlikely that they will ever suffer damage to the extent that they need to be entirely rebuilt?
It is not unreasonable that the owner of a small home should pay a lower premium than the owner of a large home. There has to be a fair way to measure the premiums paid for the insurance of homes of different sizes and different methods of construction. The rebuilding cost of each home provides a consistent way of measuring the extent of risk for different homes. It is accepted that homes are seldom damaged to the extent that they need to be entirely rebuilt and this is taken into account in premium rates.
It is not prudent, in our view, to relate the market value of a home to its rebuilding cost.
- Can you value my home for insurance purposes
We have negotiated competitive terms with a national firm to provide our clients with an independent professional valuation service. Please see Other Services for further information about this service.
- My existing policy does not have a sum insured - do you offer the same?
The majority of home insurance policies are based on a sum insured for each building but some insurers do offer policies with unlimited sums insured.
We do not offer a policy with an unlimited sum insured because there is such a large variation in the size of the homes we insure. If we charged a fixed premium for each home regardless of size it would tend to mean that the owners of small homes pay a higher premium than they need to while the owners of large homes pay a lower premium than they should do.
- What happens if my home is under insured?
When a home is under insured the owner has not paid the full contribution to the pool of premium from which claims are paid. Therefore, when a claim is made most insurance policies contain conditions that allow insurers to reduce the amount paid. In the event of serious under-insurance an insurer can void the policy and repudiate liability for a claim.
- Can you value the contents of my home for insurance purposes?
We can put you in touch with specialist firms who provide this type of valuation service.
- How do I calculate the total sum insured?
The sum insured for household contents should represent the replacement costs of the contents of each room in your home including furniture, carpets, curtains, tableware, kitchen equipment, electrical items, books, home entertainment systems, computers, paintings, ornaments, clocks, special collections, household linen, shoes and clothes. Do not forget the contents of the outbuildings, which usually contain a number of electrical items as well as garden equipment, tools and sport, leisure and hobby items. Garden furniture and ornaments should also be included.
We can provide you with a personalised inventory to help you calculate the current replacement costs of the contents of each room in your home. The completion of an inventory is a very useful way of checking the adequacy of the sum insured for household contents.
The Millers Guides to antique prices will help you to identify the current replacement costs of antique items of furniture, china, clocks and collectibles.
For jewellery and personal possessions see the guidance notes below.
- How much should I insure the contents of my home for?
General household contents are insured on a new for old basis and should be valued at their current replacement cost for insurance purposes. Antiques and works of art are insured for their current market value. An allowance for wear and tear needs to be made in arriving at the value of household linen and clothing.
The total sum insured should be the full value at risk.
- What happens if the contents of my home are under insured?
When the contents of a home are under insured the homeowner has not paid a fair contribution to the pool of premium from which all claims are paid. Therefore, most insurance policies contain conditions that allow insurers to settle claims at less than full cost in the event of under-insurance. In the event of serious under-insurance an insurer can void the policy and repudiate liability for a claim.
- What is a Bank or Building Society valuation?
When a home is purchased it is normally valued by a surveyor employed by the lenders who will report on the market value and its value for insurance purposes. Lenders usually insist that a home is insured for the reinstatement value recommended in the valuation report. At each subsequent renewal of the policy that sum insured is index linked by an inflation factor published by the Building Cost Information Service of the Royal Institute of Chartered Surveyors.
- Why should I insure all of the contents of my home when it is unlikely that all of them would be lost or damaged at the same time?
The total loss of contents would be a rare event but we have dealt with claims amounting to 80 to 90% of the total sum insured for household contents.
It is not unreasonable that the owner of a home having £30,000 worth of contents should pay a lower premium than the owner of a home with £60,000 worth of contents.
There has to be a fair way to measure the premiums paid for the insurance of homes with different values at risk. This is why the total value at risk is used to calculate the premium paid. The fact that the total loss of the contents of a home would be a rare event is taken into account in premium rates.
Jewellery and Personal Possessions
- Do I need to obtain jewellery valuations?
To insure individual items of jewellery with a value in excess of £10,000 on an agreed value basis a valuation or purchase receipt less than three years old is required. Items with a value higher than £10,000 can still be insured without evidence of value but, in the event of a claim, it would be necessary to prove the value of the item to the insurers. Claims for items of jewellery are more straightforward to resolve when current valuations are available.
- How do I insure jewellery and personal possessions?
When they are within the home items of jewellery can be insured as part of the contents of home. Most home insurance policies contain a single article limit for any one valuable and an overall limit for all of the valuables within a home. Limits under the policy for any one valuable within the home is £3,500, with an overall limit for 30% of the sum insured for all valuables within the household contents. For all practical purposes the cover provided for the contents of a home stops at the boundary of the property.
When away from the home items of jewellery can be insured as specified items or as part of the cover provided for unspecified personal possessions.
The limit for any one unspecified personal possession away from home is £3,500. Therefore, an item of jewellery with a value in excess of £3,500 needs to be insured as a specified item if cover is required away from home.
When there are several items of jewellery with individual values of less than £3,500 the need is to select a sum insured for unspecified personal possessions equal to the maximum value at risk away from home at any one time. For example, if there are 10 items but, at most, a maximum of three items are worn away from home at any one time, then the need is to select a sum insured equal to the value of the three most expensive items likely to be worn away from home at any one time. The items remaining at home would be insured as part of the cover provided for the contents of the home.
- Which items need to be specified?
The policy insures specified items, which are noted on the policy schedule with a description and the current sum insured for each item.
When an item is insured on an agreed value basis the insurers will meet the current cost of replacement if it is lost or stolen, or the cost of repair if it is damaged.
For an item to be insured on an agreed value basis it is necessary to have written evidence of value that is less than five years old. Evidence of value can take the form of the purchase receipt or a recent valuation.
In the event of a claim, if purchase receipts or valuations are over five years old it will be necessary to provide the insurers with evidence of the current value of the item.
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