As a landlord, it is your responsibility to make sure that your property is insured for the correct amount. Landlord insurance is calculated on the valuation of the rebuilding cost of your property back to its original state. This valuation is different to the market value. There are several factors that drive up rebuilding costs including:
If you get the rebuilding cost wrong and it is lower than the actual rebuilding reinstatement cost, then you are at risk of being underinsured. This means that if the worse was to happen and you have to make a claim you will only receive a proportionate percentage of the claim amount from the insurer. This is known as the average condition.
To illustrate how this works: an insurance policy covering a landlord’s property is based on a sum insured of £100,000. Unfortunately, following a flood the landlord had to make a claim on the buildings insurance for a damaged kitchen at a cost of £10,000. However when the claim was made, the correct rebuilding value of the property was £200,000 . This meant that the property was underinsured by 50% when compared with the actual sum insured in the policy. The claim payment was then reduced proportionately by 50% with the landlord only receiving a payment of £5,000 – which is only 50% of the value of the loss suffered.
It is, therefore, very important that your property is insured on an up to date ‘rebuilding value,’ and this figure should be regularly revalued at least every 2/3 years.
There are various ways that residential landlords can calculate the rebuild cost, but the easiest way is to use the online calculator from British Construction Information Services (BCIS ) to determine an accurate rebuilding cost of your property.
This will calculate you the exact rebuilding cost. It only takes a couple of minutes to register and answer a few questions on your property - including year built, storeys, postcode, floor area, number of rooms, roof and wall type. Alternatively, you can contact us on 0344 346 0307 with your details at hand and we will do the calculation for you. It is so important that you get it right so that you have adequate cover should you suffer a loss and have to claim,
Once you have done so, you should contact us to update your policy.
At Towergate, we can cover a wide range of rental properties and types of tenants including multi occupancy, students, and local authority placements. Our policies can include cover for loss of rent, loss of keys, accidental damage, alternative accommodation costs, and more.
You can compare prices from a range of leading insurers, as well as add-ons such as landlord home emergency insurance.
Alison Wild BCom (Hons), MAAT, MATT, Taxation Technician is a highly respected industry professional who has been working with and advising SMEs in areas including tax, pensions, insurance and marketing for over 25 years. She is a member of the Association of Accounting Technicians (AAT) and Association of Tax Technicians (ATT) and also has 20 years' experience as a residential landlord.
Date: June 14, 2022
Category: Commercial Property