Home Rebuild Cash Settlement

Dibble12

Thanks for all our your replies. I will contact the insurance company on Monday and see what the best way forward is.

Hoenir

neilbart said:

rebuild our house which have come in very high (approx £150k more than the house would be worth when built).

When was the property built? 

TELLIT01

Hoenir said:

TELLIT01 said:

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

You weren't asked for any information of this nature on the application form ? 

Information of what nature?  The policy states 'Unlimited' for rebuilding value.

Aretnap

neilbart said:

Nearlyold said:

The insurers position is probably down to the fact that if they paid you the cost of the rebuild in cash (which is greater than the value of the property) you would be better off than you were prior to the damage to your property. This would present a Moral Hazard.

I can’t see anything in our policy about this...

The policy will likely say that in the event of a total loss they will clear the site and rebuild the house. That's likely to be the only thing they're obliged to do. If you would prefer a cash settlement you are asking then to do something that they're not obligated to do by the policy - so they can offer to do it on any terms they like, or not offer a cash settlement at all.

neilbart said:

I asked the insurer about a potential cash settlement and they have provided a figure which was the value of the house, minus the value of the land. 

This amount would be about £300k less than the rebuild quotes and would not allow us to either rebuild ourselves or find a house the same size as the one destroyed.

Not sure I follow. You would still own the land, and so selling the land and taking the cash would give you the value of the house. Why is that not enough to buy a house of the same size as the one that was destroyed? Was your house of particularly low value for the area?

Aretnap

TELLIT01 said:

It seems crazy to me to accept a cash settlement which is less than the rebuild cost of the property.  Presumably a large proportion of any payment would be required to pay off the mortgage.  What would you do about somewhere to live after the various debts were paid off?

1. Take cash
2. Sell house (or what's left of it)
3. Pay off mortgage 
4. Buy new house (possibly with new mortgage)

Leaves the OP financially in the same position as he was in before the incident, possibly less the normal costs of moving house. May or may not be the best possible outcome, but it's hardly crazy.

TELLIT01 said:

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

Presumably you mean rebuild cost, which is completely different from the value of the property (and this is also the point that Hoenir is getting at).

Hoenir

TELLIT01 said:

Hoenir said:

TELLIT01 said:

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

You weren't asked for any information of this nature on the application form ? 

Information of what nature?  The policy states 'Unlimited' for rebuilding value.

The insurer would have asked questions on the application form. .  

Be foolish to charge the same premium for a house costing £200 to rebuilt another costing £2 million. 

user1977

Hoenir said:

TELLIT01 said:

Hoenir said:

TELLIT01 said:

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

You weren't asked for any information of this nature on the application form ? 

Information of what nature?  The policy states 'Unlimited' for rebuilding value.

The insurer would have asked questions on the application form. .  

Be foolish to charge the same premium for a house costing £200 to rebuilt another costing £2 million. 

They’ll have based it on the other info on the proposal form. They’ll know roughly what (eg) 3 bed semis in postcode X will cost to rebuild.

Hoenir

user1977 said:

Hoenir said:

TELLIT01 said:

Hoenir said:

TELLIT01 said:

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

You weren't asked for any information of this nature on the application form ? 

Information of what nature?  The policy states 'Unlimited' for rebuilding value.

The insurer would have asked questions on the application form. .  

Be foolish to charge the same premium for a house costing £200 to rebuilt another costing £2 million. 

They’ll have based it on the other info on the proposal form. They’ll know roughly what (eg) 3 bed semis in postcode X will cost to rebuild.

Did you complete the OP's application form for them ? 

Aretnap

Hoenir said:

user1977 said:

Hoenir said:

TELLIT01 said:

Hoenir said:

TELLIT01 said:

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

You weren't asked for any information of this nature on the application form ? 

Information of what nature?  The policy states 'Unlimited' for rebuilding value.

The insurer would have asked questions on the application form. .  

Be foolish to charge the same premium for a house costing £200 to rebuilt another costing £2 million. 

They’ll have based it on the other info on the proposal form. They’ll know roughly what (eg) 3 bed semis in postcode X will cost to rebuild.

Did you complete the OP's application form for them ? 

Probably not, but that's how bedroom rated policies work so it's not exactly difficult to deduce. The insurer makes it's own estimate of the rebuild cost based on the number of bedrooms, the area, the building materials and maybe a handful of other details declared if the form, and bases the premium on that. But then it applies a very high (or even unlimited) cap on the rebuild cost that the policy pays, so that if their estimate is the rebuild cost turns out to be a little to low it's the insurer's problem rather than the consumer's problem.

All perfectly sensible and a lot fairer than the alternative, where the consumer has to declare a rebuild cost and is left shafted if the house burns down and it turns out that it's going to cost £160,000 rather than £150,000 to rebuild. The insurance company after all has a much better idea of what a 3 bedroomed semi costs to rebuild than the average consumer does, so it's only fair that they take on the risk of the rebuilding cost coming in a bit higher than expected.

DullGreyGuy

Hoenir said:

TELLIT01 said:

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

You weren't asked for any information of this nature on the application form ? 

You won't be, it a "bedroom rated" policy, I put it in quote marks because these days they tend to ask more than just how many bedrooms you have but also how many other rooms there are but its how the blanket policies started working and so the name has stuck.

The original ones also weren't unlimited but something fairly substantial like £0.5m or £1m but after they were proven both popular and something the insurer can make money on the limits went up and some now are "unlimited", again with quotes because its the total sum insured that is unlimited, some thing will have inner limits. For example M&S Premier is unlimited in both buildings and contents but has a £5m limit on public liability, £50k on valuables and £15k for any single valuable. 

As to the OP's question... need to see the policywording for a start