11 March 2021

Underinsurance in the residential property market

It’s estimated that nine out of ten properties in the UK are insured for the wrong amount, with the vast majority (79 percent) of them being underinsured for an average of 69 percent of the amount for which they should be insured. 

More than a third of policyholders are using ‘market value’ to set their buildings sum insured and one in five ‘simply guess’ according to a new study.

Reinstatement valuation experts RebuildCostASSESSMENT.com asked 580 brokers to identify the source of building sums insured in the UK, in a recent poll.

More than a third (35%) said policyholders used the ‘market value’ – the amount the property would currently sell for – rather than the correct basis, which is the cost to rebuild from scratch. Even more concerning was the fact that 20% believed their clients guessed at what the sums insured should be.

Just 5% said the source had been a professional property assessment carried out by a ‘Regulated by RICS’ organisation.

“Our extensive data based on tens of thousands of property assessments shows that nine out of every ten buildings in the UK are insured for the wrong amount,” said RebuildCostASSESSMENT.com director Trevor Smith. “When you look at where brokers believe these figures came from, it’s not surprising there is such a widespread problem when it comes to the accuracy of property sums insured.”

Almost a quarter of brokers (24%) said sums insured were set according to what the insured’s bank or building society recommended they insure for, while 6% identified other third parties such as accountants or property agents as the source. One in ten (10%) insured for what the previous owner covered the property for.

Trevor Smith commented: “It takes professional expertise to determine property reinstatement values. Brokers have told us that in the past the cost of a valuation would often be prohibitive. However, our digital approach means an accurate ‘Regulated by RICS’ assessment report can be sourced for as little as one tenth of the price it used to.

“There is no longer any excuse for building sums insured to be so off the mark. Over-insurance means clients paying too much for their cover and underinsurance, which affects around 80% of policyholders, can mean severe consequences in the event of a claim. A persistent campaign highlighting the only reliable source of building sums insured is needed to really tackle this issue.”

R K Henshall and Co Ltd work in Partnership with RebuildCostASSESSMENT.com and can offer Rebuild cost assessments for as little as £100. The report will give you an accurate rebuild sum insured and ensure that you are fully covered in the event of a claim.

If you have any questions or concerns about underinsurance or an insurance policy, you can contact us on 01270 758070 or alternatively contact us.

Next up

Our Location

The Grove, Mill Lane,
Wheelock, Sandbach,
Cheshire, CW11 4RD.
Telephone: +44 (0)1270 758070
Fax: +44 (0)1270 758059

R.K. Henshall © 2021

R K Henshall & Co Ltd are Independent Intermediaries and are authorised and regulated by the Financial Conduct Authority. Directors: J.R. Henshall B.A.(Hons) ACII Cert CII (FS), A.J.Simpson ACII, T.R.Dredge DIP CII, A.Brown FCCA. Director/Company Secretary R.K. Henshall ACII. Registered No. 1285024

R K Henshall are very proud to support Lupus UK. Lupus UK is a charity very close to our hearts. Unfortunately, Nita Davies who had been a stalwart of our company from it’s very beginning lost her battle against this terrible illness in 2013. Lupus UK is the only National Charity which supports people with the immune system illness. (Registered charity nos. 1051610, SC039682) Click here to read more about Lupus UK.