General Insurance Article - 10 million homes could be wrongly insured

Up to 10million1 homeowners could be risking their homes through under insurance according to leading UK insurer SunLife.

  1.   67% don’t know the rebuild cost of their home
  3.   35% think rebuild cost and house value are the same
  5.   Flood Desmond highlights importance of getting the right level of cover
 Recent research, conducted by SunLifehas found that 67% of homeowners don’t know the ‘rebuild cost’ of their home, with more than a third (35%) wrongly assuming it is the same as their house value2.
 “When you buy buildings insurance, you will need to know the ‘rebuild cost’ of your home, which is the amount it would cost to completely rebuild your home if it was destroyed beyond repair”, explains Simon Stanney, director of insurance at SunLife.
 “Unfortunately, two thirds of homeowners don’t actually know what this is or how calculate it properly. Contrary to popular belief, it is not the same as the current market value of the property, as more than a quarter (28%) of homeowners believe2.”
 Having an accurate figure can help prevent over or underinsurance. If you over insure, you could be paying out £100s in unnecessary premiums, but if you underinsure, the consequences could be very serious, as Simon explains.
 “In the unfortunate event that your home requires a complete rebuild and your buildings insurance is not sufficient, you will be left to cover any difference in price. Worse still, if your property is mortgaged you could be left with no home and thousands to pay back to your lender.”
 The best way to get an accurate rebuild cost is to get a surveyor to carry out detailed measurements of your house and then prepare a professional Rebuilding Cost Assessment; this costs around £250.
 “However, only 8% of homeowners do this - most people either don’t want to or cannot afford to spend this kind of money,” says Simon, “therefore, many either look at calculating the rebuild cost themselves (22%), or just leave it, hoping the insurer will estimate it for them (30%).”3
 There are tools available, for example, the rebuild cost calculator from RICS but you will need to know your home’s external floor area for both upstairs and downstairs as well as what it is made from, the type of house, how old it is, and this can be difficult to get right leaving many homeowners either under or over estimating the cost.
 The other way to avoid the issue of over or under insurance is to shop around for a policy that doesn’t ask the question. There are a number of providers out there that offer buildings insurance with a standard rebuild cost cover, including SunLife’s new home insurance.
 Mr Stanney concludes: “Despite the fact our research shows that most people don’t know what rebuild cost is, many policies still ask for it, and this is an example of how some insurers are not thinking enough about their customers. At SunLife we’re doing things differently by cutting out questions like that, and making it easier for customers to get the cover they want, without paying for features they don’t need.
 “With SunLife home insurance you can choose the type of cover you want - contents only, buildings insurance or both - then choose extra cover options to build the policy that's right for you and your budget.”

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