Buildings insurance to get cheaper

21st July, 2005

A new online buildings insurance system could revolutionise the way buildings insurance is calculated, making premiums potentially cheaper and ensuring that homes are covered for their full value.

The system allows homeowners to work out how much cover they need, based on the actual rebuild costs of a property and not its value or location, which can sometimes distort premiums.

"Many people will find they are paying too little house insurance and some may find they are paying too much," said Joe Martin of the Royal Institute of Chartered Surveyors (RICS) Building Cost Information Service.

"Few people realise that insurance on buildings is driven by construction inflation rather than market prices. Most have ideas about the rebuild costs of their homes which are way out," he added.

The RICS' Building Cost Information Service (BCIS) cost calculator works out the price of rebuilding a house if it was destroyed by an act of God, such as flooding or if was ruined from a fire.

"Rebuild costs are not always proportionate to size and market value. It is possible that a highly valued, new-build house in Mayfair will need to be insured for less than a Victorian terrace in Bridlington. The cost calculator gives people a starting point to check they are paying the right home insurance," Mr Martin explained.

Ensuring that a property is fully insured to its total value is vital for homeowners.

Following the Lewes floods in 2000, the district council discovered that 20 per cent of local residents were underinsured by up to £15,000, leading to financial misery for some.

Jane Milne from the Association of British Insurers, commented: "Home buildings insurance is an essential protection, ensuring that life's unexpected emergencies can be managed with out incurring debts. But it is vital that the correct rebuilding valuation is used when buying insurance to make sure any claim can be paid in full."

 

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