Do you know what it would cost to rebuild your property if it suffered serious damage?
Chances are the answer is probably not. But increasingly home owners are expected to supply an accurate rebuild cost to insurance companies when taking out a buildings insurance policy. And this is where potential problems can arise.
Imagine – just for a moment – that your home suffers a catastrophic fire or is flooded. It’s no longer structurally sound and rebuilding is the only solution.
Your first port of call will, of course, be your insurance company to make a claim. Now if you submitted a guesstimate as to the rebuild value when you first bought your insurance you could be in for an unpleasant surprise.
Because if your insurer decides that your property is undervalued they will reduce accordingly any payment due under the buildings insurance policy. You may then be faced with a serious shortfall that will need to be bridged if you are to rebuild your home to its original standard.
One of our clients recently had an unfortunate experience. Mr and Mrs X had originally approached home-approved® to carry out a building survey on the property they were purchasing. The sale went through and Mr and Mrs X settled into their new home.
Some months later the outdoor swimming pool located within the grounds suffered serious storm damage and the couple submitted a claim to their building insurers. As is standard practice, the insurance company sent out a surveyor to assess the damage. Not only did he examine the swimming pool, he also measured the property and took full details of all the occupants – even the family pets!
Following the surveyor’s visit the insurance company informed Mr and Mrs X that their property was undervalued in terms of insurance rebuild by a whopping 20%! The insurers then exercised their right to reduce the payout against the claim by 20%, which meant the couple received only £16,000 compared to the £20,000 they expected. And they certainly weren’t expecting to have to find thousands of pounds themselves in order to have the pool repaired.
The rebuild cost is not the same as your home’s market value
Rebuilding covers the cost of the materials required and labour involved to build a new property that is identical to the original. The final amount is likely to be less than the market value of your home if you were to sell it because the market valuation is so dependent on factors such as location and supply and demand at any one time.
There are other pitfalls to also be aware of. Guessing the rebuild cost works both ways – you’ll lose out if you under-value, and if you over-value your home you will end up paying an unnecessarily high insurance premium. On top of that, if you do have to make a claim your insurer will never pay out more than the actual rebuild value, so that high premium will be an even greater waste of money.
It’s also important to be aware of exactly what your buildings insurance covers, particularly if you also have outbuildings, such as a garage or greenhouse, or features like a swimming pool – and to make sure that a rebuild valuation takes them into consideration. As our clients found out to their cost, insurance companies are scrupulous in their own valuation assessments.
Adding an extension or converting the loft also has an impact on valuation. If your three-bedroom house now has a fourth bedroom in the loft and you haven’t advised your insurance company of such a change you run the risk of being underinsured.
Older properties bring with them even greater problems – the cost of rebuilding a house with period architectural features will be significantly greater than a modern build property. And just imagine trying to source specific stocks that match an 18th Century build!
So how do you find out your property’s rebuild value?
The most accurate way to establish your property’s rebuild value is to request an insurance rebuilding valuation as part of your survey – and that’s where home-approved® can help!
As Chartered building surveyors we offer Rebuilding Cost Assessments as part of our service. We will take detailed measurements of your home and assess its rebuild value, taking into account its structure, from the foundations to the roof, doors and windows, built-in fittings such as the kitchen and sanitary items, along with installations for heating, water, gas, electricity and lighting. Exclusions to the cost assessment are loose fittings, such as carpets, and furnishings.
Once you have our valuation report you can then ensure you have the appropriate buildings insurance cover in place. More importantly, you will have the peace of mind that, should the unthinkable happen, you will not be faced with the worry of how you will ever afford to make up any financial shortfall.