With insurance, there is a tendency to concentrate on making sure those things most precious to you are correctly insured, especially with all of the hype surrounding Watches, Jewellery and investment contents, but very rarely do we talk about the actual building you live in which is often your biggest asset. So why not?
Most clients who approach us have had Buyers Report or Survey conducted at the point they purchased their new home and if the Surveyor are RICS approved, you can be confident that the rebuild costs identified will be accurate to use when you are obtaining insurance. This is great news at the outset but just like jewellery and watches, things change.
Most home Insurance policies will either insure on an Index Linked Rebuild basis which will be automatically updated each year.
SO WHAT IS THE ISSUE?
• Most home Insurance policies will either insure on an Index Linked Rebuild basis which will be automatically updated each year or on a Blanket Cover Basis where the cover can appear to be better than it really is..
• Index Linking is applied by insurers at each renewal based on the current National Average increase in Rebuilding costs. It does not take into consideration that the rebuild costs in London maybe increasing at a higher rate to those in Newcastle for example and there are many reasons why including -
• Cost of obtaining materials in London compared with Newcastle
• Parking costs
• Planning costs
• Permits for clearing of the derelict property following a total loss
• Architects fees, the list goes on.
THE EFFECT OF NOT CHECKING THE INDEX LINKING
Not withstanding any changes you make to your property, at each renewal your sums insured will be updated in line with current Index Linking, but at each renewal a gap may start to form between the actual rebuild cost for your property and how much you are insuring for. As time goes by the gap in what you are covering for and what you need can become huge.
TINA MARLOW, OUR ACCOUNT EXECUTIVE SPOKE OF A GOOD RECENT EXAMPLE...
• A new client approached us earlier this year previously insured through their bank.
• The new client advised that their property was last surveyed over 20 years ago.
• Due to the type of property and other factors we felt that the £888,000 rebuild that was requested maybe too low so we advised the client to obtain a fresh Rebuild cost through RebuildCostAssessment.com. The cost was only £160.00 at the time and quite often, our insurers will provide such appraisals free of charge depending on the insurer.
When the report came back ,the correct Rebuild Sum Insured was established at £1.4m (a 57% increase).
WHAT WOULD HAVE HAPPENED IF THE CLAIM HAD OCCURED?
• Most U.K household policies contain clauses within the wording warning of Misrepresenting the cost required to rebuild their property. Even worse, the majority of standard home policies will have clauses that allow them to reduce the claim by the amount of the under insurance or even void the policy completely leaving your insurance worthless. This also has a double impact as the client will have to disclose the claim being struck out and a policy being voided to future insurers.
• At best this could effect the amount paid out by the insurer and they would have only received £888,000 leaving the client to find the money to rebuild their property properly.
WHAT ARE THE BENEFITS OF CHECKING THE REBUILD?
1. Just because the sums insured went up by 57%, the premium only increased by 25%
2. By having a RICS approved survey conducted within 5 years, many Private Client insurers will guarantee the rebuild cost even if it is not enough.
3. Peace of mind that you are covered correctly. Call Property Wealth Insurance and See how we can help you insure correctly with better cover.
Mr Hall contacted Property Wealth Insurance Brokers to review his 5 bedroom, Grade 2 listed house & barn insurance insured via his bank.
Why? - Mr Hall assumed that his Index Linked home insurance cover of over 10 years provided adequate cover.
No time - Due to a busy lifestyle, Mr Hall had been unable to review his contents insurance including his valuables built up over a life time.
Following Our Review:
Original Cover £438k
Revised Cover £736k
Change Of Cover Move to a Listed Property Specialist
Increase needed 146%
Change to premium Only 5%
Original Cover £50k
Revised Cover £133k
Change Of Cover Specific cover for Antiques and Contents covered Worldwide
Increase needed 166%
Change to premium Only 5%
What if Mr Hall had not reviewed his insurance with PWI?
Due to under insurance, his home insurer may only settle 60% of a claim or worse cancel his insurance completely In the event of a loss, would Mr Hall's insurers have the expertise to deal with a claim for a listed property?
With no specific protection for Antiques, Mr Hall's New-for-Old Contents Insurance would not have correct cover to meet his expectations, yet they may charge higher premiums.
Mr Day was recommended to Property Wealth Insurance by his Car broker as he was looking to purchase a new Ferrari within a few days of making contact but Mr Day also had identified that he had 3 other cars, his home insurance, Travel insurance, second home and a holiday home all covered with different insurers with different renewal dates.
How did PWI assist?
After the initial telephone conversation Mr Day received a competitive quotation from us for the Ferrari he was purchasing but we were also able to provide an indication quotation with the same insurer to cover the rest of his vehicles, his Buildings and Contents Insurance, annual travel and his second home all under one policy and were able to agree to sweep up each element as and when they came up for renewal on a pro rata basis saving the client having to pay cancellation fees and providing all for all of their domestic insurance needs with one policy under one renewal date.
How did Mr Day Benefit?
A recent client was recommended to us as they had purchased a 700 year old Olive tree which was featured at the 2015 Chelsea Flower Show worth approximately £18,000.
The client’s current insurer would only cover garden plants and shrubs up to £5,000 and at the same time, the client was having £2.7m of works conducted at their property at the same that the Olive tree was arriving.
How Did PWI Assist?
At PWI we have a range of insurers covering many unusual items that are precious to our clients. We were able to arrange insurance for the client to cover the Contract Works value as well as the existing structure for the duration of the works at their home and cover or clients prized Olive Tree should a loss occur.
Upon discussing a a client’s rebuild sums insured for a Grade II listed Property with 3 storeys, an outhouse, Annex and outbuildings the client had requested a sum insured of £468,791.
Adter questioning this, the client asked us to update it to £700,000.
How did we help?
After providing an indicative quotation for buildings insurance, we agreed with the prospective insurer to fund a professional Rebuild Survey in order to ascertain the correct level of cover for the client through an independent appraisal service which would normally have cost the client in excess of £500.00
The Appraisal recommended a Rebuild Sum insured of £1,078,100 which client thought was a little high but the client had never had it explained to them the methodology and implications of rebuilding a Grade II listed house versus a simple rebuild of a typical non-listed house.
Valuation was based on a total demolition of the site including garden, garden walls, out buildings, site clearance, surveyors and architect fees, Grade II listings approvals and also 20% on top of all of that.
The Appraisal stated that a complete destruction of the whole site was so rare as to be a miniscule risk of being totally demolished ‐ and therefore the 20% VAT on repairs would apply versus a ‘new-build’ which excludes VAT.
The client accepted the rebuild and the insurer also applied an Unlimited rebuild cost guarantee to the policy as the client had received a RICS approved valuation.
If PWI had not provided the advice…
Had the client suffered a total loss claim with a standard Perils based home insurer, it is likely that their policy would have been voided due to misrepresentation of the risk and the client may not have had any payment made towards their claim.
We were recommended by a reputable Jeweller to a young lady who had been given a Patek Phillipe watch from her grandmother which she had valued at £18,000. Miss Bellard lives at home with her parents and together they had a Home insurance for their buildings and contents and three separate policies covering similar items with a jewellery only insurer.
What did PWI suggest?
After an initial telephone conversation, we suggested that they may be paying too much for their jewellery insurance and offered to visit Miss Bellard and her parents to review their home insurance needs and jewellery covers.
Upon visiting the clients, we listened to them about what they wanted from their insurance and then together, conducted a contents inventory with the family which concluded that their General contents were almost 50% under insured meaning that they could have an issue with any claim if a loss were to occur with their current insurers. We also discussed with them that their current security arrangements may need reviewing with recommendations provided on measures they can take.
How did PWI help?
After the meeting, we conducted a full market appraisal of Miss Bellard familly’s insurance needs and provided a quotation which reduced the cost of their jewellery insurance by embedding them into a new Warranty Free Home insurance covering their Buildings, Contents, Collectibles and jewellery with an insurer who also agreed to contribute towards the cost of the security upgrades.