Buildings Insurance / rebuild cost

simonspeakeasy

Any help would be appreciated on this one:

My granite-built farmhouse with 4 smallish bedrooms has a rebuild cost of around £500k according to the surveyor. They explained that the cost was relatively high due to the building's granite construction.

How much do I need to insure it for?

The reason this is not an entirely stupid question is that, if it burned down (or whatever), I would be more than happy to replace it with a modern timber-frame structure which would cost much less than £500k.

The building is not listed.

Thanks in advance for any assistance.

phill99

You have to insure it for £500k. You can't under insure. If you do you won't get a full pay out.

It's not about you being happy with a timber frame house.

rs65

phill99 wrote: »

You have to insure it for £500k. You can't under insure. If you do you won't get a full pay out.

It's not about you being happy with a timber frame house.

Agreed. What if only one wall is damaged?

bouncydog1

One of the policy conditions is that you insure for the full reinstatement cost and pay the appropriate premium.

If you under insure, in the event of a claim insurers will either apply average, which means that if you under insure by say 10% any claim will be reduced by 10%. Alternatively they can void the policy which means you have no cover.

What happens if your roof is damaged in a storm and you submit a claim - presumably you will expect insurers to pay the cost as that is what you have bought the policy to cover.

It is quite unlikely that your property will burn down and have to be fully reinstated as in the scheme of things this is remote, therefore you being happy with a timber style building is irrelevant - you must insure to reinstate the granite version.

System

I once discussed this point with an insurance assessor. He said rebuilding cost was a difficult concept to apply to a substantially-constructed traditional building, because there are in practice hardly any circumstances in which complete rebuilding would be necessary. Even a devastating fire would leave the walls intact, so they would not need rebuilding.

In the virtually impossible eventuality of total destruction, full rebuilding to the original specification would not be permitted by building regulations anyway (unless a listed building), so a cheaper modern option would inevitably be used.

He advised me that the "rebuilding cost" should sensibly be a compromise, somewhere between the literal full rebuilding like-for-like cost and the realistic cost of rebuilding a lookalike by modern methods. He suggested 75% of the full cost, ie in my case at the time, he advised £300,000 rather than the theoretical £400,000.

*Scarlett

Many mainstream insurers offer a blanket cover of £500k or £1m. Some offer "unlimited" cover fpr the rebuild cost.

You also need to bear in mind other costs - ground clearance, architects, surveyors fees, etc which would need to be accounted for in the sum insured. Also think about what you would get for alternative accomodation in the event that the house needed to be completely rebuilt.

Don't underinsure - find a company that gives a £750k or £1m blanket cover. You will still pay the premium appropriate to your own details and property details even with if blanket cover is more than you need.

£70 p/m sounds expensive - does this also include contents? Eg if you are insuring a lot of high value jewellery it will increase your premuim substantially.

However you should be able to shop around for a better deal.

Check excess fees for one that you are comfortable with and bear in mind that a lower excess may not affect the price as much as you might think.

simonspeakeasy

Thank you all for your excellent feedback.
Most of it makes complete sense; I just have to rationalise Clifford_Pope's 75% comment with the points made about partial loss (i.e. if a claim was being made for a part of the building e.g. a room rather than a total rebuild).

System

To summarise what I think the assessor was saying, was that this may be a rare example where the cost of rebuilding the whole would be less than the sum of rebuilding the bits. That is because if a part only were damaged it would have to be repaired at the full cost for a traditional building, but if a full rebuild were necessary, it could be done using much more economical modern methods.


I suppose an approximate analogy might be a car that is worth less than the sum of its parts. If you add up the cost of replacing every single component in a car it would probably exceed the cost of a new car. But that doesn't mean you are underinsured because someone has stolen your wheels.

rs65

Only ever insure for 100% - not 75%.

One loss assessor can say what he wants but if you are asked for the rebuilding cost, then that's what you give.

*Scarlett

Re-iterate - do not under insure. Forget about 75% or whatever - it's not worth it.

As stated by bouncydog1, you need to insure the full amount.

If you underinsure you will run the risk of claims being declined, reduced or the insurance being completely invalid.

As an example - I know this relates to contents but it's the same principle -

You insure your contents for £20k cover and there is a fire / total loss. The assessor comes out and sees that actually your contents were worth £40k. The best that you could expect the insurer to pay would be £10k - 50% of what you had insured as you would not have been paying the appropriate premium.

If the actual value was higher than the underwriter would have accepted ie £100k of contents cover and they only accept up to £50k then the policy would possibly be invalid as you did not declare the true value and they would not have taken on your business if they had known that you had £100k contents.

Sorry to be talking about contents but I just find it a bit easier to explain and the same principles apply to the buildings - don't under insure :eek: