Buildings Sum Insured

saajan_12

Trying to understand the actual sum insured for buildings insurance, between the stated "rebuild cost" you enter in and the max buildings cover in a policy.

For example I'm going via CompareTheMarket which uses SimplyBusiness and requested a quote for buildings including accidental damage, no contents, 250k rebuild cost. The best quote it found said "Our buildings insurance covers up to £600,000 as standard. This is to provide assurance that your property is covered for this amount, regardless of any difficulty you may have in estimating your property's rebuild cost". Ran it again with 350k rebuild cost and everything else unchanged, and it came out with the same 600k buildings cover and same comment, but a much more expensive policy. 

However the cost of the policy is over £110 apart, and trying to work out why. If it would cover anything up to the 600k in any case, then why is the policy cost changing? If not and it only covers the rebuild cost I initially mentioned, then that's not very clear once you click through to buy, as it keeps mentioning the 600k

BarelySentientAI

It covers up to £600k, but on one quote you're telling them to expect to spend around £250k and on the other to expect to spend around £350k.  You can see why that would be a different price?

saajan_12

But does the expected cost feature in the legal policy wording usually? The comment litterally tells you to not worry if you can't estimate the rebuild correctly, so why wouldn't people low ball it? Whos to say that the expected rebuild cost has to be based on any reason?

DullGreyGuy

Given you are talking about simply business this is obviously a Landlord policy but there are close parallels to Home insurance. 

Home is typically written on a sum insured or "bedroom rated" basis, ie either the insured is asked to say what the rebuild cost of the house is, lets say £250,000, and you declare its of stone construction. The insurer doesn't know if this is a sprawling mansion made of reclaimed local stone or a tiny hut made from a rare marble stone. Alternatively the insurer says they are going to insure all properties for £1m but instead you have to say how many bedrooms you have (or these days bedrooms, bathrooms, other rooms) and from that they can risk assess maybe better than simply knowing it'd cost £250,000.


Both of these work fine in isolation were you to go direct to the insurers website. Now when we include traditional brokers or aggregators etc they end up asking both because some of their insurers are sum insured and some are bedroom rated. There is nothing to stop the insurer using the additional questions they wouldn't have asked had you approached them directly to rate. 

The CIDRA rules will remain though, if you give reckless or intentionally wrong answers, like saying rebuild cost is £4.22, then they can void the policy and avoid all claims. 

There is potentially a secondary matter too, companies get very twitchy with people manipulating the unchangeable. The increase on the second quote may not be cause you increased the sum insured but simply that you changed a value that should be fixed and as a counter fraud mechanism it'd have gone up irrespective of if you increased or reduced the sum insured. Not saying it is the case, would think it less likely with the likes of Simply Business but it's another possibility.