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Reinstatement cost – Have you got the right amount of cover?

As a landlord, you are responsible to ensure that you have the correct amount of insurance for your property. Landlord insurance is calculated on the reinstatement value of your property. That is what it would cost to rebuild the property back to its original state. Many landlords often use their surveyors’ report for this figure. If the property has recently been bought or remortgaged this won’t be an issue. You are responsible as a landlord to ensure that your rebuild cost is correct.
 

Did you know that if you make a claim and the reinstatement cost is incorrect it could cause you a problem?

 
When you insure your assets, like a building, you must advise the insurer of the value to insure the property for. If you get this insurance value wrong and it is lower than the real reinstatement value then you are at risk. Meaning that in an event of a claim you will only receive a percentage of the claim amount. This method of paying out a percentage of a claim is known as a condition of average.
 
For example, the insurance policy covering the building is based on a sum insured of £80,000.00. When a claim occurred the real insurance value was £100,000.00. The proportion of average would then be £80,000.00 or 80%. You would only receive 80% of any loss that you suffer.
 
There are various ways that you can calculate the insurance but the easiest way is via https://abi.bcis.co.uk/. The website will work out for you the exact rebuild cost. It only takes two to three minutes to register and go through various questions to help you. You could alternatively instruct a local surveyor. Their costs are upwards of £250.00 but it is so important that you get it right.
 
You will often find that the rebuild figure is lower than what the properties market value is. This is because in real terms it is what it costs to rebuild not what it is valued at today. There are rare exceptions of when the property value is lower than the rebuild cost but these are market specific.
 

Summary

 
I believe that it is absolutely critical for landlords to check their landlord insurance rebuild cost. We have had one very bad experience for a landlord where he cancelled the index linking over many years. This lead to the property being underinsured. Whilst he was saving £30.00 or £40.00 each year by removing it, it came to a devastating end when the property burnt down. Due to the removal of index linking, the payout was £30,000 less than the full claim amount. I would strongly advise all landlords to check their rebuild figures using the link that we have provided above.
 
Mark Harringtons
 
Managing Director
 
www.iinsure365.co.uk

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