Property Insurance – Sum Insured Increases

You may have noticed that insurance premiums for property have increased significantly over the last few years. The main reason for this is that the cost of building materials has almost trebled since 2022, on top of an increase during the Covid Pandemic period.

All this leads to higher rebuild and repair costs for insurers when claims are made for repairs or rebuilds of properties both private and commercial , thus insurers requiring higher premiums to be able to pay for the claims.

Preventing Underinsurance

Each year most insurers will apply an ‘index-linked’ increase to the rebuild sums insured of the property, however this is usually not enough. The important issue for property owners is having the correct sum insured in place on their property. Responsibility for having the correct rebuild sum insured in place lies solely with the property owner. As brokers we would always advise that having the correct sum insured is essential, and to ensure this is correct you should use the services of a qualified surveyor to ensure there is no underinsurance.

Why Does It Matter If You Are Underinsured ?

Being underinsured generally means in the event of a claim, you would receive a reduced settlement. If a building is insured for £200,000 ,  but on investigating a claim , it is found that the true rebuild cost should be £400,000, any claim settlement could be reduced by 50%. In extreme cases, insurers may even refuse to pay out at all.

Underinsurance is a real problem in the UK. Insurers research has found that around 80% of properties in the UK are underinsured. With the changing weather patterns leaving more properties to be exposed to more severe storms, and more flooding, higher value claims are inevitable. The correct sums insured are essential to protect your property investment.

What do Property Owners need To Do ?

Speak to your Broker and ask if the sums insured on your policies are adequate. Your Brokers are not qualified to calculate the correct sum insured but they will have a general idea and be able to point you in the direction of a qualified building surveyor for this purpose.


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