Buildings insurance is inarguably essential cover for homeowners, protecting against loss or damage in the event of fire, explosions, floods, storms and earthquakes. However minimal the risk of these events, taking out insurance is a pre-requisite for most mortgage lenders and, even if you have purchased you property outright, is advisable.
In order to take out buildings insurance, you will first need to know the cost of rebuilding your home. This differs from the market value of your home, as does not include the land on which your property was built. You can find out the cost of a rebuild by looking at your deeds, mortgage paperwork, or using this free Building Cost Information Service calculator.
As the cost of materials and labour rise over the years, it’s inevitable that the cost of rebuilding your home will also increase. For this reason, it’s advisable to get into the habit of checking the calculator every so often just to make sure you have enough cover in the event that you need to claim on your buildings insurance. There are exceptions to this — index-linked cover and unlimited sum insured. Unlimited sum will cover you for a very high amount, mitigating the risk of being under-insured. However, unlimited sum insured policy premiums will be higher than covering the exact cost of rebuild, meaning you could be overpaying. A standard sum insured policy will cover you for the exact cost of rebuilding your home, so you will never overpay. Additionally, if you choose index-linked, the sum will automatically be tweaked to reflect changes in rebuilding costs.
Another option is a bedroom-rated policy. This will offer you a very high sum insured, which negates the risk of being under-insured. However, the downside of this is , again, that you may pay more in premiums than you would if you opted for an index-linked policy.
As with all insurance policies, never deliberately under-insure to get a cheaper deal. Equally, over-insuring is also not advisable — your insurer will only ever pay out rebuild costs, regardless of how much you paid in premiums, so you could end up wasting a lot of money.
If you need any help or advice choosing the right buildings insurance policy, contact our expert team today!
