When applying for landlords insurance and calculating the amount of cover you need to protect your investment, you will be asked how much buildings sum insured you require.
Some landlords mistakenly believe that this amount should be equivalent to the current market value, or the amount of mortgage outstanding on the property.
However, the sum insured should actually factor in a number of different costs:
- the actual amount it would cost to rebuild your property if it was completely destroyed (note, this isn’t the market value, as already mentioned above);
- this cost should include amounts for clearing the site before rebuilding as well as the cost of fixtures and fittings (if you turned your property upside down and shook it, the stuff that didn’t fall out, such as fitted wardrobes and kitchens etc, are classed as fixture and fittings);
- professional fees etc.
In the event of a claim, if you are underinsured (ie. your buildings sum insured amount is lower than the actual cost to re-build your property), you will be left having to find the remaining monies yourself (whilst still paying your mortgage on your property, if you have one). It’s not a good financial situation to be in.
How can I find out my rebuild value?
The amount can usually be found on your valuation report or mortgage survey. If you are still unsure of the rebuild value, use the Association of British Insurers’ rebuild calculator.
Finally, if you have any questions relating to your buildings sum insured, please feel free to get in touch. We will be more than happy to help.