Guide to Property Insurance
Official statistics maintained by the Land Registry show that the average house price in the UK (as of March 2018) is £224,144. That figure represents an increase of some 4.2% compared to the previous year – indicating that an investment in property is likely to yield at least as good a return as any savings account and many other forms of investment.
Having made that investment, you also need a way of protecting and safeguarding its value against the many threats of loss or damage it might face – from events such as fire, earthquakes, explosions, storm damage, flooding, impacts (by vehicles or from falling trees and branches), vandalism and theft.
So, let’s take a closer look at what that property insurance entails.
Property insurance for the homeowner
Your home is likely to be one of the most expensive items you buy in your life.
Home insurance offers a way of protecting your investment not only in the building itself, but also (if required) in all the contents which you are likely to have built up over the years – and which may prove very expensive to repair or replace if any are lost, stolen or damaged.
The total building sum insured typically reflects a worst-case scenario in which your home needs to be completely rebuilt after a major disaster (such as a fire which razes it to the ground, for example).
The reconstruction cost is neither the price you paid for the property nor its current market value, but represents the estimated costs of clearing the site, commissioning the architects and engineers to rebuild your home, and obtaining the necessary planning permission. It is a valuation that may be kept up to date with reference to the reconstruction index published by the Royal Institute of Chartered Surveyors (RICS) and the Association of British Insurers (ABI).
It is equally important to keep your valuation of the contents thoroughly up to date. Many homeowners make the mistake of underestimating that value – and, therefore, underinsuring, with the result that there are insufficient funds in any settlement of a claim to adequately repair or replace lost or damaged items.
When arranging or renewing your property insurance, therefore, be sure to review the valuation of all of the contents of your home.
Property owners’ liability insurance
One aspect of property insurance that many homeowners may overlook is the indemnity it grants against claims from members of the public or your neighbours who may suffer an injury or have their own property damaged through some connection with your home. A loose tile from your roof, for example, might be blown away and come crashing down onto your neighbour’s glass conservatory.
Claims such as this may involve substantial amounts – especially if someone suffers an injury – so it is usual for your property insurance to provide a minimum of £1 million indemnity. With some providers of property insurance, this can be as much as £5 million.
Property insurance for the landlord
If you have let the property you own, remember that you need to arrange a particular type of property insurance, aptly titled landlord or buy to let insurance.
Not only is this designed to provide the protection needed for the premises themselves, but may also help to protect the financial health and integrity of the business you are running as a landlord.