How many of us truly understand insurance? We know it’s something we need to have in our back pocket in case of emergency, but how many of us really understand how crucial it is to get right? Looking at the stats we’re about to go through, it turns out very few of us have a thorough understanding of buildings insurance! And the most common thing people get wrong when purchasing buildings insurance for their home or commercial property? Underinsurance!
In this blog we’ll detail some eye-opening stats that detail the UK’s underinsurance problem.
80% of UK properties are underinsured
That’s right. 4 out of 5 properties in the United Kingdom are underinsured. This means that if the worst was to happen and a property suffered significant damage, the amount paid out following a claim would be severely reduced. Nobody wants their property damaged, but we would all sleep a little easier at night knowing the repair bills would be taken care of if that rainy day did come, wouldn’t we?
On average, underinsured buildings are covered for just 68% of the amount they should be.
If our buildings are only covered for 68% of the amount they should be, who has to make up that remaining 32%? Yes, you guessed it, the person staring back at you in the mirror! When we’re talking about the value of buildings, this 32% isn’t an insignificant amount equitable to a compulsory or voluntary excess on a typical insurance policy. It’s a significant amount of money that could have catastrophic consequences on personal or business finances. Quite simply, the risk simply isn’t worth taking.
587,000 high-value homes in Britain are underinsured
Once again, we aren’t talking about pocket change. These are homes that have a value exceeding £1million. Using the 68% vs 32% average we looked at above, the owner of a £1million home would be left to find £320,000 if the entire home needed rebuilding.
Why are properties underinsured?
Let’s start by looking at materials. In the timespan of just 2 years, international shortages of supplies have seen material cost skyrocket:
- 20% increase in the price of copper
- 52% increase in the cost of MDF
- 30% increase in the cost of timber.
- 31% increase in the cost Lead
Couple this with a 16% rise in the cost of home renovation labour and it’s pretty easy to see why so many buildings are currently underinsured!
What about overinsurance?
- 14% of UK buildings are overinsured – this means people are paying more for their insurance cover than they need to.
- Overinsured buildings are covered for an average of 126% of their value.
We’re pleased to say the stats aren’t quite as frightening here and we would always like to see people have too much cover than not enough, but why pay more than needed?
What steps should I take?
If you’re worried you might be underinsured or would simply like to know more about underinsurance, contact one of our advisers today. We’ll be happy to talk to you and help ensure you aren’t included in the eye-opening stats we’ve displayed above!