Home Insurance will pay for the repair or rebuild of your property in the event of an accident. Therefore the cost of rebuilding your home is something insurers, particularly high net worth insurers, are very interested in! But why is it something you should be interested in right now? Why might the cost to rebuild your property have significantly increased in recent times? Are you underinsured? You could even be overinsured.
With a rebuild cost assessment, it’s easy, quick and inexpensive to obtain a reliable estimation of the cost to rebuild your property. So why the fuss?
Queues, Flus and the EU Blues
We have all seen the recent headlines about various shortages, and the ensuing queues at the pumps. The latest from Boris is that this could go on until Christmas! It has also been reported that there could be shortage of toys in the lead up to the festive season (panic buy now!). And it’s not just toys; with the prospect of a Christmas turkey looking a little bleak too – it would seem that UK farms cannot get the pluckers…..
Simple Supply and Demand.
A shortage of HGV drivers, fuel, toys or turkeys don’t directly affect us as insurance brokers. But unfortunately, the turmoil in the supply chain and the wider economy will affect your insurance requirements. Making sure your level of insurance cover keeps pace with the market and state of the economy is important, but something that few do on a regular basis, if at all. Note: as insurance brokers, we make sure we have discussions with our clients to minimise the risk of under or overinsurance.
During Covid, many people were unable to travel so they have decided to spend their money on other things such as home improvements. Extensions, refurbishments and garden offices – just some examples of projects that seem to be happening all around the UK. This has led to an increased demand for materials and tradespeople. Some suppliers of building materials closed up completely during the first lockdown, leading to supply issues that even now have not been fully rectified.
According to RICS, around 10% of UK building trades come from EU countries. This figure rises to around 33% in the London area. During the pandemic many of them were forced to return to their home country and have been unable to return, due to travel restrictions. This is causing a lack of available tradespeople, not just skilled, but all levels. Additionally, the UK Government have made various pledges about building new houses and there are developments popping up across the country. Reading, our home town, in particular is seeing a surge of urban development currently.
So, home improvement projects and developments all around, coupled with a lack of materials, trade, plus building delays, have led to a see-saw of increased demand vs lack of availability. Just like the current fuel issue, well, kind of. Panic buying of cement wasn’t exactly widely reported!
The supply and demand issue has in turn forced increased costs in the building trade, with some material costs increasing by up to 80%, and the cost of employing trades through the roof (pun intended).
How is this related to insurance I hear you ask?
The knock on effect is that in the event of a claim, the cost of repairing or reinstating a property could be way above where it would have been just a couple of years ago.
It is important to make sure that your rebuild figure is accurate. Most insurers apply an annual indexation figure and while index linking provides some protection against rising costs of repair or reinstatement of property, it is not a failsafe. In the current climate it is important that clients keep their sums insured up to date to protect from underinsurance, especially where improvements or additional outbuildings have been added.
On the flip side, it is also relatively common for individuals to be overinsured in respect of buildings cover. Something as simple as a misunderstanding in terminology may lead to the value of the property being given as the rebuild cost, which of course it is not. A property valued at £500k may cost £200k to build. Insuring a £500k rebuild cost will demand far higher insurance premiums than a £200k rebuild cost. Simple maths and calculated risks.
Some High Net Worth insurers offer a free appraisal service, but if not, at Macbeth we can offer our clients a facility via Rebuild Cost Assessment, who are RICS approved and can carry out a remote survey with a one-off cost of £102*, a saving of over £50.
(*prices correct at time of publishing)