70% of UK Properties are Underinsured!

Shocking recent reports indicate that approximately 70% of properties in the UK are underinsured, meaning their insurance coverage is insufficient to cover the full cost of rebuilding or repair after a loss.

The most common reasons for this is outdated valuations, unreported renovations, and inflation all of which can lead to the property owners being covered for a significantly lower amount than the actual rebuild cost of the property.

The impact to property owners in the event of an insurance claim can be devestating as the most likely outcome is the insurers claim payment will not be enough to cover the full cost of rebuilding or repairs, leaving the owner to cover the shortfall.

Property insurers whether its a commercial or residential premises will generally include an "Average Clause" within the policy wording. This is triggered when the declared value given by the property owner is less than the actual reinstatement value of the premise. In a claim situation the insurance will use the following formula to work out the claim payment: (Sum Insured / Reinstatement Value) x Amount of Damage.

Example Claim:

• Declared Value - £1,000,000
• Actual Reinstatement Value - £2,000,000
• Damage Costs - £500,000

Applying the formula: £1,000,000 / £2,000,000 X £500,000 = £250,000

The end result in the above is the Property owner is only paid half of the damage costs and is responsible for the £250,000.

We at Butterworth Spengler South West work closely with RICS approved online surveyor to obtain an accurate reinstatement cost of a premise and we have access to A Rated Property insurers in the market giving a comprehensive search of the market to our clients to gurantee we are giving the best coverage at the best price. 

To talk to us more about property insurance, please don't hesitate to get in touch with us.  

Mike Douglas Cert CII

Account Executive

Butterworth Spengler South West

07802 437515