Landlord's Insurance and rebuild cost

roadweary

Hi,

Until a year ago, the place I rent out had landlord's insurance that separately stated the rebuild cost.  From memory it was about 2/3 of the value of the property which will of course include land.

The broker (A Plan) moved all their policies to commercial terms last year and send out warnings about the new increased costs and paying for a remote survey (£99 + vat - assuming they don't add any extras) to make sure the value is fit for purpose.

My situation is that I've just remortgaged.  The old mortgage using an index I believe had the property being worth almost 350k.  The valuation done for the re-mortgage, which the bank says is often different to what would be achieved on sale, was 305k.  My best guess, is that the property is worth somewhere between 350 and 400k.....but it's difficult to know as no real comparable properties have sold in recent years; mine is a corner plot / end-semi.

The new insurance covers £331k

Anyhow, I know the safe thing is to get a survey of some kind done....but to me it feels like £331k for rebuild is more than enough for a 3-bed property worth 350-400k.

I'd be grateful for people's thoughts.

Thanks,
R

lincroft1710

Labour and material costs have increased considerably in the last 4 years. Don't forget rebuild costs also include demolition and clearance of the site

roadweary

Yup - I get that....I just wondered if there was a rule of thumb to see if I'm in the right ballpark.  Btw, 1960s, standard brick build.

user1977

Doesn't your lender give any guidance about what value they require you to insure for?

I don't think there's a rule of thumb based on market value as it depends on how that compares to the size / complexity of the property e.g. there'll be plenty of mid-terraces or semis where the rebuild cost would be substantially more than the market value because of shoring up neighbours / difficulty in access etc.

Martico

Calculating Rebuild Costs

roadweary

user1977 said:

Doesn't your lender give any guidance about what value they require you to insure for?

I called them and they gave me the £305k surveyor valuation, but couldn't tell me what I needed to insure the property for!

MultiFuelBurner

I have always opted for the 1million mark saves worrying and added about £8 from £500k from memory last renewal

DullGreyGuy

Rebuild cost and valuation are two independent things. In some parts of the country rebuild is higher than valuation and in other parts it's the other way around. You need to insure it for the rebuild value irrespective what the valuation is. 

There are online tools, as linked above, that will give you an estimate of a rebuild cost but it's only an estimate and only good as the details you put in. 

roadweary

MultiFuelBurner said:

I have always opted for the 1million mark saves worrying and added about £8 from £500k from memory last renewal

If it's as little as that, it's a no brainer....I've asked the broker to find out.

roadweary

MultiFuelBurner said:

I have always opted for the 1million mark saves worrying and added about £8 from £500k from memory last renewal

In my case, increasing from £330k to £500k added £94.06 and increasing from £330k to £750k added £243.69, so I think I'll bite the bullet and get an accurate rebuild figure.

DullGreyGuy

roadweary said:

MultiFuelBurner said:

I have always opted for the 1million mark saves worrying and added about £8 from £500k from memory last renewal

If it's as little as that, it's a no brainer....I've asked the broker to find out.

There are two ways to rate Home insurance (appreciate you have Landlords)... Sum Insured or Blanket (aka bedroom).

The former is the traditional insurance, you set a value based on your actual need and they price on that. Blanket/bedroom rated dont ask for the value but instead ask more questions about the number of rooms in the property etc (initially it was just numb of bedrooms but they typically ask broader rooms now) and irrespective of the answers everyone gets the same high level (or even unlimited) cover. You can think of it as using this data to proxy your likely value and rating off that but in practice they dont tend to estimate the value. 

With blanket policies you will see very little difference between going from a company with a £0.5m limit to one with a £1m or Unlimited cover because you still own a 2 bed semi in Dover and despite the limit difference the exposure (what they are at risk of paying out) is unchanged as it'll cost £160,000 to rebuild no matter what the policy limit is. 

Changing the limits on a Sum Insured policy will materially increase the price because the assumption is you really have a £0.5m rebuild cost and whilst hitting the maximum payout becomes more remote the higher the limit it still can happen. 

The one thing to be careful of with blanket policies is any inner limits. More of an issue with Contents insurance but for example M&S Premier insurance via Aviva is unlimited contents but only up to £50k of Valuables (jewellery, watches, art works etc not electronics etc) 

Landlord insurance is a bit of a grey spot, its technically commercial insurance but some personal lines insurers think its close enough to Home for them to write a bit of it for single property landlords. I've not looked at the market in years but would expect most to be doing sum insured policies but can easily imagine one or two blanket options may be out there.