In theory, if you have building insurance, the insurer should pay for the cost of repairs in the event of damage. Unfortunately, it’s not always that simple in practice. While insurers won’t refuse an insurance claim you can prove you’re legally entitled to, there are many reasons why the claim may be considered invalid.
One of the most common is that the property is under-insured. This could be because the valuation is out of date, or it could be because you’ve added an extension. After all, that new west wing isn’t going to insure itself.
Of course, it doesn’t have to be anything as grand as that — a new conservatory can change the value of the property. On the other hand, just leaving a valuation in place for too long could be just as bad. In a volatile market, it’s possible that even a two-year-old valuation will be out of date.
If it turns out your home is under-insured, the loss adjuster will apply the Average Clause to calculate how much to pay. This means that if, for example, your home is only insured for half its actual value, then any pay-out made under that policy will also be half its actual value.
This applies for any size of pay-out. For example, if your home is worth £400,000 but is only insured for £200.000, then if you try to claim £50,000 for damage, you’ll only be paid £25,000.
How Much to Insure Your Home For?
What you’re insuring your home for is the total cost of rebuilding it in the event of catastrophic damage. To find this out, you could speak to a local contractor, or check the website of the Royal Institute of Chartered Surveyors. Then add a few percentage points, to allow for increases before the next renewal date.
You’ll also need to take account of any alterations or improvements you may have made. These need not be extensions —anything that’s increased the property’s valuation will affect your policy. This will ensure the loss adjuster won’t have any cause to use the Average Clause.
Finally, remember that your building insurance doesn’t include the land, only the structure itself. If you add the value of the grounds, you’ll be paying extra premium and getting nothing if you do try to make an insurance claim on the land.
It’s best to update the valuation of your home every time you have to renew your policy. That will mean that, if you do have to make a claim, Allied Claims will be able to get a full pay-out for you.