Underinsurance and Rebuilding Cost Considerations

Are you adequately insured? Key Considerations for High-Value Homeowners

In today’s evolving property landscape, ensuring your home and valuables are properly insured is more important than ever. Many homeowners unknowingly fall into the trap of underinsurance, which can lead to significant financial shortfalls in the event of a claim.

In addition to underinsurance, life can take an unexpected turn so it’s crucial to understand the growing complexity and expense associated with rebuilding costs, which can be influenced by inflation, specialist skills, and modern building regulations.

Underinsurance: A Hidden Risk

If you’re a property owner it’s important to ensure that your assets (buildings, contents and/or rental income) are sufficiently insured. With high-value homes and property portfolios we often find many are underinsured, and it’s critical to ensure that your sums insured are correct and not too low as the amount you are paid in the event of a claim can be proportionally reduced.

What is Underinsurance?

Simply put, underinsurance means that the level of insurance you have isn’t enough – and can mean that you might have to pay more yourself in the event of a claim.

For example, you may be underinsured if you:

• Buy new possessions and/or assets and don’t update your insurance policy to include them
• Underestimate the worth of your property or contents at policy inception

How can underinsurance affect me?

Many insurance policies have a clause related to underinsurance called ‘average’. This means if you are underinsured, and you make a claim the amount you are paid can be reduced as the average clause will reduce the claim payment in line with the percentage that you are underinsured by.

Protect Your Home: Key Steps to Avoid Underinsurance

Contents Inventory

Many homeowners underestimate the value of their contents. A thorough walk-through of your home using a checklist can help you:

• Identify overlooked items
• Avoid gaps in coverage

Regular Valuations of High Value Items

Items such as jewellery, fine art, and collectibles often appreciate over time. However, insurers typically do not automatically adjust the insured value of these items. We recommend:

• Update your insurer on your collections

Schedule regular appraisals

Buildings Survey

A professional buildings survey helps to ensure your sums insured is accurate. While some insurers offer this service, independent surveys are also available.

Rebuilding Cost Considerations

Rebuilding a home isn’t just about bricks and mortar – it’s about restoring your lifestyle. Several factors can dramatically affect the cost of reconstruction.

Inflation and Cost Indicators

According to BCIS, The House Rebuilding Cost Index rose by 40% between January 2020 and January 2024, this was driven by inflation, supply chain disruptions and increased demand for skilled labour.

Specialist Skills

Bespoke architecture and heritage homes often require specialist tradespeople. These skills can mean higher costs for homeowners when rebuilding.

Building regulations

Rebuilding must meet current building regulations, which may differ from those that were in place when your home was originally built. All of which can add complexity and cost to the whole process.

Smart Home Technology and Luxury Finishes

From integrated security systems to marble countertops, modern homes often include features that are expensive to replace. Consider the impact this may have on your reconstruction costs.

To find out more about underinsurance and other things that may have an impact you, get in touch with us today. Our Kingfisher Private Client team offer excellent service in providing and arranging specialist cover for client’s rare and valuable possessions.