Level of buildings and contents cover on a 4 bedroom semi value approx £275000

millerfamily5

Hi

My House and contents insurance is due for renewal at the end of the month. On considering renewal of my policy (with Axa) I noticed that it is possible to reduce the amount of buildings insurance from £1,000000 to £500,000 and contents from £85,000 to £65000.
As the market value of my home (a 4 bedroomed semi detached house) is about £275000 with a rebuild value of £202,000 I cant understand why the buildings cover needs to be £1,000000.

Also on reading Martin's advice on House and Contents insurance he seems to quote a typical family value for contents at £35,000. In which case I cant see the point of having contents insurance over £65000.

I have nothing of individual great value other than my wife's engagement ring worth about £5500 which would need insuring for personal possessions away from the home.

I would appreciate any advice on what sort of cover level I actually need for house and contents insurance.

Thanks
Richard

kingstreet

Rebuild cost has nothing to do with market value.

Insurers often have blanket cover which is rated on postcode and number of bedrooms, not on sum insured. Therefore, there is no benefit to you in reducing the sum insured.

If you want to go for a proper sum insured rated policy instead, you need to calculate your rebuild cost, perhaps using the ABI calculator, but be careful if you do;-

http://abi.bcis.co.uk/

As far as your contents cover goes, ensure you fully insure everything just in case. Underinsuring can bring "averaging" into play in the event of a claim. ie You under insure by 50%, the insurer only pays out 50% of the sum you actually need to replace your belongings.

Again, many insurers use blanket bedroom-rated cover so you don't have to work out your contents value.

InsideInsurance

There are two ways to rate, you either do sums insured where each customer sets the exact values they need and your price on that or (Bed)room rated where you set a well above average limit for everyone and then rate it on a combination of room count (or sometimes more explicitly bedrooms) and postcode to a higher degree than you would on sums insured.

The advantage of bedroom rated policies is that for the majority of people you avoid the risk of under insurance because there are not many of us with a property that'd cost half a million to build. The downside can be that due to negative selection they tend to also insure people with higher than average values and so the premiums are higher compared to say a below average value sums insured policy thus creating a bit of a vicious circle.

rs65

millerfamily5 wrote: »

I have nothing of individual great value

You will be surprised how much everything you own adds up to. Remember its not today's value - its today's replacement cost.

millerfamily5

Hi

Thanks for your replies. I understand the issue of undervaluing my contents and using the Hiscox contents calculator was useful.

However I still don't get the reason for insuring my house for £1,000000 if it would cost about £202,000 to rebuild according to the abi calculator.

Regards

Richard

rs65

millerfamily5 wrote: »

However I still don't get the reason for insuring my house for £1,000000 if it would cost about £202,000 to rebuild according to the abi calculator.

Some insurers just use blankets amounts which benefit you as the chance of underinsuring is remote.

You don't have to use one of these insurers and can take a sum insured policy if you want.

kingstreet

millerfamily5 wrote: »

However I still don't get the reason for insuring my house for £1,000000 if it would cost about £202,000 to rebuild according to the abi calculator.

Regards

Richard

Your house is insured for its rebuild cost, with an upper limit of £1m. Some insurers actually use the word "unlimited" for such cover, which may have been more helpful.

The premium for a policy with a sum insured of £202,000 may be more, may be less. However, the "blanket" ensures there can be no mis-calcuation which affects you later.

Robin9

If you can find a company to insure you for £202,000 then you might save a few pounds.

Consider what happens in a few years and you still have cover for £202,000 but the rebuild proves to be £250,000 - your pennies saved become insignificant

InsideInsurance

millerfamily5 wrote: »

However I still don't get the reason for insuring my house for £1,000000 if it would cost about £202,000 to rebuild according to the abi calculator.

Its a marketing gimmick predominantly but for joe public it has the benefit of ensuring you arent under insured and they dont actually rate on the property being £1m to rebuild but a ballpark based on the number of rooms, property type and construction.

Faith177

Blanket cover often gives you additional cover for things like site clearance fees, architect fees and any other fees that may be incurred if your home is a total loss. I'm not sure if a policy based solely on your BSI would give this or if you would have to include this on top

rs65

Faith177 wrote: »

Blanket cover often gives you additional cover for things like site clearance fees, architect fees and any other fees that may be incurred if your home is a total loss. I'm not sure if a policy based solely on your BSI would give this or if you would have to include this on top

There should be no distinction on this between differently rated policies. A sum insured basis policy will cover these, as long as the sum insured is adequate.