Finding out, when you make an insurance claim, that the level of cover you bought doesn’t cover the amount needed to replace your loss, can have devastating consequences. This is called under-insurance and can be a significant issue.
Getting the right level of cover is critical
The maximum amount you would receive in the event of a claim is the amount you declared when you took out or renewed your insurance policy. This amount is known as the sum insured or insured value. It is important to get this sum insured right to prevent a problem should you need to claim. For example, if your sum insured is less than the amount needed to replace your property, you would be under-insured and may not get the full amount needed to rebuild your property potentially leaving you with a deficit to find.
Assessing the right level of cover for your buildings
The sum insured for your buildings should be the present day rebuild cost.
This is not the market value of your premises nor the price you paid for your building. A professional valuation will help you decide on your sums insured and here at Unity we recommend that you have your property valued at least every three years to be safe.
Your buildings sum insured will need to include costs for:
- driveways, garages and outbuildings, boundary walls, gates, fences and so on.
- materials and labour required to repair or rebuild;
- architects, surveyors and other legal fees;
- the cost of demolition and debris removal;
- VAT (as necessary); and
- any public authority or planning costs.
Getting the right level of cover for your contents and equipment
The amount you should insure your contents and equipment is its replacement-as-new value.
It should not be the price paid for the items, as again the replacement cost may be different from this especially if the claim is a few years on from the purchase.
Likewise, if item has been donated as a gift or purchased second-hand, then you still need to insure these items for the full replacement costs. If you have equipment that is no longer manufactured you might need to insure for the value of a new equivalent item.
An up-to-date inventory of all of your equipment is useful when considering how much cover you need.
Keeping your level of cover up to date
The value of your buildings, contents and equipment will change over time. Therefore, regular valuations on all are necessary to help ensure the sums insured are correctly assessed.
When you buy or receive items which are donated, remember to advise your insurance broker. You should also let your broker know, if you no longer own any items to avoid paying for cover you no longer need.
We’re here to help
Unity can provide advice on how to assess your sums insured. We can help you to understand the basis of your insurances and sums insured to ensure you are properly covered if you have a loss.