How do I Calculate my Building Sum Insured?
A buildings insurance policy needs to cover the total cost of rebuilding your home in the event that it is totally destroyed, plus the cost of removing an debris. It is not the same price as you paid for the property or the current market value as this would include the cost of the land on which it is built.
If you want to be sure that you have bought the right level of cover then you will need to pay a building surveyor to carry out a survey and recommend a figure. This can be expensive, but it is the only guaranteed method of getting your sums right.
If you want to try to calculate an approximate figure yourself then there is some helpful information on the Association of British Insurers website, including an online calculator. Note that this method is only useful; if your home is of standard construction – if you have a thatched roof, listed or a wooden building then you should commission a surveyor to assess the rebuild value. If you have recently purchased your home you should find that there will be a rebuild figure shown on the Mortgage Valuation.
You should review your building sum insured regularly as prices do increase over time and it is important that our sum insured is adequate to cover the full rebuilding cost in the event of a claim. Most policies automatically index link your sums insured, however you will need to make an adjustment if you update or improve your property if this results in an increased rebuild value.
Some insurers offer a fixed sum insured in order that you don’t have to work out how much cover you need. Do be careful with these policies if you are close to the policy limit as these limits are normally not index linked and you could be caught out if your rebuild cost increases to a value on excess of these sums.