BCIS (The Building Cost Information Service of the Royal Institution of Chartered Surveyors) releases research highlighting how a high proportion of homeowners could be paying the wrong premium for their buildings insurance if they make the common mistake of insuring for market value rather than rebuilding cost.
According to price comparison company Confused.com, three out of ten home owners incorrectly believe that the rebuilding cost of their home is the same as the market value. The BCIS research shows that for the UK as a whole, around six of every ten people would be over-insured if market value is used, with homeowners paying an average of £140 more in premium than necessary. Conversely, a fifth will be under-insured with an average shortfall in cover of £40,000.
Insuring for market value has different likely impacts depending on location. In London, there is a high risk of over insurance with, on average, homeowners paying £570 more in premiums than necessary. However, in Yorkshire and Humber, there is a good chance that homeowners would end up being under insured. Insuring at market value here leads to an average shortfall in cover of £72,000, exposing homeowners to the risk of their claim not being settled in full. This could affect any claim, not just a total loss. See end of article for full regional breakdown.
BCIS is the Building Cost Information Service of the Royal Institution of Chartered Surveyors (RICS) and the UK’s leading independent expert on rebuilding costs. Its residential rebuilding cost models are accepted as industry standard by surveyors and insurance loss adjusters. The BCIS research compared a statistically representative sample of 225 homes across the UK showing the difference in premiums when the buildings sum insured is based on the property’s market value rather than the rebuilding cost.
Andrew Thompson, International Development and Data Director, BCIS comments: “The research we have carried out demonstrates the importance of insuring for rebuilding cost rather than market value. Homeowners can avoid having to determine the rebuilding cost of their property by opting for a bedroom rated buildings policy with capped or unlimited cover but ultimately, they can only be assured of the best deal if they obtain both bedroom rated and sum insured based quotations. Through insurance brokers and price comparison websites, BCIS rebuilding cost data allows homeowners to do just that.”
Homeowner Hints and tips from BCIS to avoid over or under insurance on buildings insurance:
– Where applicable, buildings insurance quotations should be based on the rebuilding cost of the property and not the market value. Many insurance brokers and price comparison websites use BCIS data and can help.
– There are no reliable methods of converting market value to rebuilding cost.
– If the property is changed, e.g. an extension added, recalculate the rebuilding cost and advise your insurance company as soon as possible.
– Even if no changes have been made to the property, obtain a new rebuilding cost at least every three years. Do not rely on index linking for prolonged periods of time.
BCIS provides data solutions to the insurance industry to enable insurers to assess risk based on accurate rebuilding costs and ultimately provide homeowners with the right level of cover at competitive prices. Its range of solutions include the Rebuilding Cost Calculator for insurance brokers, the Notional Rebuilding Cost Matrix, containing 2.6 million residential rebuilding cost values for insurers, and the Residential ‘Look Up Service’ designed for online providers of buildings insurance and price comparison websites.
Source : BCIS Press Release
