Question on building insurance

Tumtitums

The freeholder of my property wants to get the building sum insured on the insurance policy checked however on looking at the policy it says that the building sum insured is "indexed linked" i thought this meant that the sum insured is increasing in line with inflation therefore there is no need to get the value checked or revised. There have been no extensions, loft conversions or other structual work done on the property. Internal redecoration has taken place. The value for building sum insured is around £225000 (indexed linked) however this is the same value that was written on the policy when it was first obtained i.e the specified figure has has never been updated .
The value of the properties in the area has increased over the period though.

Given the information above is there any point in me spending around £500 to get the building sum insured checked by a surveyor .

paddyandstumpy

Index linked means the value is linked to inflation (usually the RPI). However, the cost of building works has been going up at a rate far higher than inflation, so it would be prudent to get it checked if you haven't for a while.

Alternatively, you could take out a buildings policy with a blanket amount, this would save the need for the surveyor. These are fairly commonplace in the market now and as competitive in most scenarios as an index linked policy, but you have the comfort of a blanket value (usually £500k to £1m). The onus is then on the insurer to calculate the rebuild themselves and rate based on that.

There is also an index on the RICS website which will give you an indication of the rebuild value of your property, based on type, location, beds and m/sq.

You also need to consider the average clause on most buildings policies, if (for example) the £225k is only 75% of the rebuild value, you'll only get 75% of the £225k in the event of a total loss. This exacerbates the problem of not having sufficient cover in force.

paddyandstumpy

The only other point, referring back to your comment, is regarding property value.

That's never a good indication of rebuild cost as its indicative of what someone is willing to pay for the building, and the land it's on. The rebuild is more often than not less than the market value, as you'll already own the land.

Tumtitums

Thanks, seems sensible though the problem is that the freeholder is very reticent to go with someone else

paddyandstumpy

As long as the property is insured to a sufficient standard, can he block a move?

Tumtitums

yes because the policy is in his name however its not him who pays for it , its me the leaseholder but he is wanting us the leaseholders to pay for a new valuation to check the building sum insured and refuses to go to another provider who may offer more competitive prices and a better policy e.g in terms of better sum insured because all of his other properties use this particular insurer

paddyandstumpy

In the terms of the lease does it say who is responsible for arranging insurance?
And who is responsible for ensuring the rebuild is sufficient?

It seems the freeholder is expecting you to pay for the survey, but it's his insurance. It's fundamentally his property.

He can't have it both ways, either you are responsible for insuring it, or he is. If he is, he has to ensure he insures it sufficiently.

Quentin

Check the lease agreement to ensure the freeholder is not breaking any condition by demanding you pay for a valuation ( he may have grounds for a complaint against the insurer if the policy is index linked yet the cover has never changed)


Had there been a catastrophic fire then the freeholder looks to have been underinsured!

dacouch

£225k would not pay for that much of a building to be rebuilt / site cleared etc.

If there are more than two properties, I would be very surprised if this was an adequate sum insured.

Tumtitums

its basically a terraced house divided into flats. i think id rather have one of these blanket value properties than having to go through all of this every few years. The buildings insurance is already about £120 per month

Quentin

Thing is, it's not your building! (And not your policy - though you will have agreed to pay for the insurance)


Have you checked your lease agreement as advised - does it say the leaseholder is responsible for keeping the insurance properly adjusted?