A sustained rise in construction costs over the past year is increasing the likelihood of significant underinsurance of buildings across the UK.
Rebuild Cost Assessment data has highlighted that, on average, ‘buildings are covered for just 68% of the amount they should be in Britain’. This, added to the increased costs of materials and labour outlined above, evidences why we cannot emphasise enough the importance of ensuring you have an adequate sum insured noted on your building insurance policy.
Prices have risen by between 40% and 50% for products and materials this year alone. However, some products, such as timber, have seen prices go up by 80% and other sheet materials, which are all key property building components.
Director of Rebuild Cost Assessment, Will Molland has stated: “The main factors at play here are pent up demand following Covid lockdowns and the re-starting of postponed building projects, as well as the impact of Brexit on imports from the EU.”
If you insure your buildings insufficiently by underestimating the rebuild cost, you run the risk of being underinsured in the event of a claim or total loss. This means you would be financially responsible for a proportion of the cost to rebuild your property to its original state in the event of a claim.
So, what does this mean? If you have insured your buildings at £400,000 and the actual cost of rebuilding is assessed to be £400,000, there is no issue. However, if you’ve insured your buildings for £200,000 and the actual cost of rebuilding is assessed to be £400,000, you have underinsured by 50%. This means, should you suffer a loss of £200,000, the ‘condition of average’ would be applied, and you would receive a low claims settlement, leaving you with a significant shortfall.
We know that getting someone to visit your property to carry out a professional assessment can be time-consuming and expensive. Thanks to our collaboration with Rebuild Cost Assessment, we can offer you a reliable low-cost service from a ‘Regulated by RICS’ (Royal Institution of Chartered Surveyors) organisation.
To start your rebuild cost assessment, click here.