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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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