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 News Articles
Are Thousands of Homeowners Over-Insuring their Properties?

Around 10 percent of UK homeowners could be paying out too much on their buildings insurance premiums, a recent study by a leading price comparison site suggests.

Research carried out by insurance aggregator Confused.com found that around 10.8 percent of customers searching for buildings insurance entered an amount in the box marked ‘cost of rebuilding the property’ equal to the market value of their property. 

This means that, potentially, tens of thousands of UK homeowners could be wasting money by forking out on a level of buildings insurance that they simply do not require. 

In order to reign-in any buildings insurance overspends, homeowners will first need to find out just how much the rebuild value of their property is. 

How to determine your home’s rebuild cost

The rebuild cost of your house can be found on your mortgage agreement or an approximation can be worked out using the house insurance rebuilding calculator on the Association of British Insurers' website.

The rebuild amount is well worth taking the trouble to find out as it could be significantly lower (possibly by tens of thousands of pounds) than the property’s purchase cost. It’s a particularly good idea to find out the rebuild cost if your home was bought at the height of the housing boom as the difference is likely to be that much greater.

However, Confused.com also recommended that homeowners be aware of the following points when determining an accurate rebuild value:

·        If you live in a period house or unusual property, you will need to ensure that your cover is high enough to allow for a complete rebuild in the original style of your home – more expensive than if your house is a relatively new or standard build.

·         It is extremely important not to undervalue your property’s rebuild value. This could leave you severely out of pocket should the worst happen, so be very careful when assessing this figure and seek professional advice if you’re not sure.

·         If you have added an extension, don’t forget to factor this in when assessing the rebuild value. (Note: your insurer should be informed if you have extended your property. This is important as in the event of any claim the insurance company will only payout on the part of your house that is actually covered)

But if you think you are among the 10 percent of homeowners who could have over-insured their property, check and see if there’s a big difference between the rebuild value and your purchase price – you could end up saving a tidy sum on the cost of your home insurance.

Confused.com looked at all buildings insurance searches carried out via its online service for the six-month period running from July 2007 to December 2007.

 



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