Buildings Insurance for Flats

neilogg

I live in a block of 11 flats in a Grade II Listed Building. Management is by a Limited Company comprised of owners who own the freehold. The Management Company arranges Buildings Insurance. This has recently risen very sharply and is based on a rebuilding cost which far exceeds the total market value of the flats. My questions are:

- Is it possible to obtain Buildings Insurance based on market value rather than rebuilding cost? This is, after all, what should be protected.

- Is it possible to obtain Buildings Insurance on an individual flat basis rather than collectively?

Any advice appreciated.

 

CSI_Yorkshire

neilogg said:

- Is it possible to obtain Buildings Insurance based on market value rather than rebuilding cost? This is, after all, what should be protected.

Why?  If it burned down then it would need to be rebuilt - isn't that what the insurance would be for?  What "should be protected" is the physical asset not its paper value.

neilogg said:

- Is it possible to obtain Buildings Insurance on an individual flat basis rather than collectively?

Yes, but complicated - lots of grey areas about what is in each flat's policy, what about communal areas, common or shared services...?

neilogg

If the property burnt down, it might be rebuilt as before or as something different. But that is not the point. The investment that each owner has is the market value of their flat. That is what needs to be protected. For most properties, the rebuilding cost is much less than the market value. That is not the case here. If anyone has information on insurers/underwriters that would consider buildings insurance based on market value or on an individual flat basis, please let me know.   

CSI_Yorkshire

I think you will struggle massively.

In previous years, where rebuild cost was less than market value, what value were you insuring against?  Are you only trying to do it this way because you think it will be cheaper?

user1977

Any mortgage lenders will require insurance to be for the rebuild cost, so (unless somebody is mortgage-free and insuring only their own flat) I can't see the point of investigating this way of thinking. And I doubt it makes much difference to the premium anyway.

neilogg

The premium has risen considerably for no good reason other than insurer/underwriter greed. Yes, I am aware of mortgage lenders' attitudes, increases in construction costs, that rebuilding cost is normally the basis for building insurance. etc. But in the situation that exists, it is reasonable to seek better deals, possibly in novel ways. Please only comment if you can make make constructive remarks on the points raised.. 

CSI_Yorkshire

"Anyone who disagrees with me is wrong and it's all because of THE MAN".

Ok, good luck with your search.

neilogg

Not at all. But I am looking for helpful, constructive advice on the points raised. I would like to know why buildings insurance could not be based on market value rather than rebuilding cost. It is not the physical asset that needs protection but the investment. This is not a normal situation and it needs "out of the box" thinking rather than conventional wisdom. You previously indicated that insuring a single flat might be possible. It would be helpful if you could indicate insurers which might consider this. 

kingstreet

Market value includes the value of the land the property is built on which isn't affected by the total loss of the building on it.

A listed building will usually have specific construction materials and features reflected in the rebuild cost and the cost of these has increased across the board in the last twelve months. Pretty much all insurance premiums are, or will be, higher than last year.

FWIW my wife's car renewal has just come in at £214.20 against £148.80 last year, a 45% increase after successive years of reductions.

Smithcom

neilogg said:

I live in a block of 11 flats in a Grade II Listed Building. Management is by a Limited Company comprised of owners who own the freehold. The Management Company arranges Buildings Insurance. This has recently risen very sharply and is based on a rebuilding cost which far exceeds the total market value of the flats. My questions are:

- Is it possible to obtain Buildings Insurance based on market value rather than rebuilding cost? This is, after all, what should be protected.

- Is it possible to obtain Buildings Insurance on an individual flat basis rather than collectively?

Any advice appreciated.

 

I understand the frustration, but buildings insurance is normally arranged based on the property rebuilding value, rather than the market value.    The idea is that the buildings insurance policy pays for the cost of damage caused, rather than the reduction in market value.   

I presume that your enthusiasm for market value based policy is simply driven by the fact that your rebuilding cost is more than the market value, as opposed to a genuine belief that 99.999% of UK buildings policies are fundamentally flawed?

Individual buildings policies for each unit are likely to be problematic.   Just because you live in the ground floor, should you not be insuring the roof?   Just because you live on the top floor doesn't mean you shouldn't be insuring the foundations.  Also, individual flat policies aren't normally designed to work in that way.    Also, what about common parts.   Also, do you you fancy 11 insurers involved in the event of a claim?   What happens if one policy doesn't pay out?

Also, you need to bear in mind the Grade II status of the property which adds some complexity in the event of the claims process.    

What is your premium?    What is the rebuilding cost?     Any previous claims/losses?      

Rates are increasing at the moment.    Rebuild costs are increasing.    A perfect storm of increased premiums is the result.  

Hope you get it sorted.   Not fun times to be a policyholder!!

Good luck

SC

eddddy

The vast majority of insurance claims don't relate to a building being totally destroyed.

So rebuild cost is used as a proxy (or indicator) for the amount of a potential claim.

For example,

If there is a small fire that damages the roof of a building...

• If it's a listed building with a rebuild cost of £3m - it's likely it will have an intricate roof,  that might cost £100k to repair

• If it's a modern building with a rebuilding cost of £500k - similar fire damage might only cost £40k to repair

Similarly, if there is a flood or escape of water...

• If it's a listed building with a rebuild cost of £3m, it's likely to have intricate plasterwork, oak flooring, oak doors - which might need to be replaced and be very expensive

• If it's a modern building with a rebuilding cost of £500k - it's likely to have plasterboard walls, MDF doors, and laminate floors - which will be much cheaper to replace.