House Insurance (excessive sum insured)

[Desdamona]

We received our renewal notice for our house and contents insurance and of course it has gone up in price.

 

Looking through the schedule we noticed that the house is insured for £400k.

 

 

As the value of the house is about half that we thought we could save money by reducing it to a more reasonable level of say £250k.

 

 

We phoned the the insurance company R.S.A. who run the scheme for the West Brom.

only to be told that £400k was the min. sum insured that they would cover.

 

It seems to us that this is a bit of a [problem] to obtain more premium/commission.

 

 

Does anybody have any thoughts or observations on this matter ?

[Conniff]

Move insurance companies, there are a hundred of them out there that will welcome you at a reasonable rate.

 

 

You can bet that if your house burnt down they wouldn't give you £400k compensation.

 

 

Same with motor insurance, you can put any value you like on your car and they will accept it and charge the appropriate premium for that valuation but when it come to paying out, they will only give the value on that day.

[unclebulgaria67]

We received our renewal notice for our house and contents insurance and of course it has gone up in price.

Looking through the schedule we noticed that the house is insured for £400k. As the value of the house is about half that we thought we could save money by reducing it to a more reasonable level of say £250k. We phoned the the insurance company R.S.A. who run the scheme for the West Brom. only to be told that £400k was the min. sum insured that they would cover.

It seems to us that this is a bit of a [problem] to obtain more premium/commission. Does anybody have any thoughts or observations on this matter ?

 

This is a total misunderstanding of how these policies work. They are just policies that offer £400k cover, as that would cover most properties. The Insurers don't have to muck around adjusting sums insured every year and policyholders are less at risk of their sum insured not being adequate.

 

You are not being charged a premium based on having £400k of cover. The Insurers use a notional sum insured to calculate the premium. The notional sum insured is based on the number of bedrooms/rooms, type of house and where you live. Insurers then work out roughly what the rebuild cost would be using RICS tables and the premium is based on that. The notional sum insured is not something you see and the Insurers staff may not be able to see it either. It is simply a way of calculating a premium for the property.

 

It is quite possible that a £400k policy of this type, will be cheaper than a policy where you tell the Insurers the rebuild cost that will be the sum insured for the policy.

 

There are Buildings Insurance policies on the market that cover up to £1million and some are unlimted. In the event of a total loss, you will only receive the rebuild cost.

[caro]

My insurance company minimum is £800k so looks like at least a couple are doing this. In the past I've made sure it's rebuild cost only, which is generally less than purchase value. There are online calculators to work this out.

 

Sadly I don't have the option of moving my insurance but I agree with Conniff that you should if you can.

[unclebulgaria67]

My insurance company minimum is £800k so looks like at least a couple are doing this. In the past I've made sure it's rebuild cost only, which is generally less than purchase value. There are online calculators to work this out.

 

Sadly I don't have the option of moving my insurance but I agree with Conniff that you should if you can.

 

The reason for these blanket cover type policies is that policyholder were regularly being found under-insured and they were getting penalised when making claims. It became very difficult because the policyholder had simply insured at the level advised by their surveyor when buying the house and had let the Insurers index link this by RICS figures that account for building cost inflation. Now of course properties are built of different materials, are of different sizes and the owners carry out home improvements which they don't tell their Insurers about. So it became a problem. Also Insurers did not want to deal with huge numbers of communications about sums insured.

 

So the answer was to provide blanket cover of £400k, £500k, £1 million, unlimited etc. You don't get charged a premium based on these. You are charged a premium based on the property details you have given the Insurers.

 

It would be a mistake in my opinion for people to take out policies which cover the exact rebuilding cost shown in a surveyors report. They may end up paying a higher premium for less cover than they could get elsewhere and not have the extra peace of mind.

[Conniff]

You are charged a premium based on the property details you have given the Insurers

But isn't the only information you have to give them likely to be what the buying surveyor gave you ??

[unclebulgaria67]

But isn't the only information you have to give them likely to be what the buying surveyor gave you ??

 

No. You tell them the postcode, whether it is a semi, detached etc, the type of construction, how many bedrooms, sometime how many living rooms etc. There are RICS guides that Insurers use which show a typical range of properties in each area around the country. When the Insurers input the information, it works out a rough notional sum insured which is used to calculate the premium. If you told them it was a property in say Milton Keynes postcode MK15, a detached 4 bed, 2 bathroom, 3 living rooms, built of brick/tiled roof, it might work out say a rebuild cost of £200k, which will be the basis the premium is calculated on. But the Insurers for simplicity, may provide a blanket cover of say £400k. If you took out a policy for £200k it may not work out any cheaper than a policy for £400k and you are not getting the additional peace of mind coverage.

[Conniff]

Thank you UB, very clear explanation, have a star.

[dacouc]

If you're insured through the West Brom with RSA you can almost certainly reduce your premium by around 50% by shopping around.

 

There will be plenty of Insurers massively cheaper (Almost certainly including RSA) don't just buy the cheapest look at cover and quality of customer service

[Conniff]

Fully agree, it's not just about price, it's also, (perhaps mainly), about the cover you get for your premiums.

[unclebulgaria67]

If you're insured through the West Brom with RSA you can almost certainly reduce your premium by around 50% by shopping around.

 

There will be plenty of Insurers massively cheaper (Almost certainly including RSA) don't just buy the cheapest look at cover and quality of customer service

 

There are still quite a lot of people who think they still have to have Buildings Insurance with the mortgage company. They just pay whatever the renewal premium is and only years later when they find out their neighbour is paying hundreds of pounds less, do they think about complaining. There was a case in the press awhile back where a lady was paying a high street Banks Insurers over £1k a year in premiums, after being with them 15 years. They then found out they could get a new policy for the same or better cover for about £400 a year.

 

Some people don't have much choice over their Insurers, because they have had flooding or subsidence or a few claims. But most people can shop around for their Insurance each year and save money.

[Desdamona]

Thanks all for your useful advice and comments.

[ericsbrother]

In many parts of the country, the rebuilding costs are greater than the puchase value of the house. Elsewhere the land value makes the property expensive so the rebuilding costs will be about 1/3 of the purchase value.

Get separate quotes for buildings and contents so you can make it easy for doing a comparison on a proper like for like basis.