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Dan Fenu Finance

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Ensuring Your Property is Adequately Insured

Daniel Fenu Daniel Fenu , 8/4/2018
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Regularly reviewing your insurances is part of maintaining good personal financial discipline. Not only should you check that you are getting the best premiums, but when reviewing your building insurance policy you should also check that your level of cover is adequate - especially if you added to or improved the property since the original rebuild estimate was calculated.

Buildings insurance is a pre-requisite of the lender if you own a mortgaged property, and in most cases where your lender is also your insurer, your sum assured will be automatically updated annually on renewal. But, if you have no mortgage or if your insurer isn't your lender, how do you ensure that the policy sum insured is adequate to cover the rebuild of your property?

Unfortunately, there is no magic formula that can be applied to associate the value of your home to its rebuild cost; there simply is no correlation. As the purpose of buildings insurance is to restore your property to its original status should damage occur, then the property's sum insured relates to the cost of rebuilding the house and not its open market valuation. That is because a significant part of your home's value is the land upon which it stands and that does not need to be included in the sum insured equation.

There are two common methods to determine the rebuild value. The first possibility is to calculate the amount using the guide published by the Association of British Insurers. That involves working out the total floor area of your property, factoring in the type of building such as semi or detached, the year it was built, and in what UK region it is located to arrive at a rebuild cost.

But, if you think that all sounds too complex and you have money to spare, then the best solution may be for you to employ a local surveyor to perform all the measurements and calculations on your behalf.

In the unlikely event that a disaster happens resulting in the total destruction of your property, it will have to be rebuilt according to current building legislation and industry standards. As such, a surveyor is also more likely to be aware of any issues relating to your property that may not be included in your own calculations. Additional costs will also need to be factored into the rebuild costs including surveyor's and architect's fees, and the cost of demolition and clearance; amounts that would be more accurately assessed by a professional.

Shiraz at says 'It is also worth checking your buildings insurance policy to see if the cost of boundary walls and outbuildings such as garages, and garden sheds are covered as that would represent a significant loss if not covered. If they are excluded it is advisable to make separate insurance provision or see if you can add them to your insurance policy in exchange for additional premium.'

But, if you are unsure about any aspect of cover on your buildings insurance, as with anything to do with financial services, consult an independent financial advisor for advice.