Autumn is a good time to review your home insurance. The evenings are drawing in, the heating is going back on and – somewhere between finding the first fallen leaves in the hallway and wondering where summer went – your renewal documents may arrive.
It is tempting to glance at the premium, check that the policy still covers the basics and let it renew. But when did you last review the value of your home and possessions?
If it was several years ago, your buildings and contents cover might no longer reflect what it would cost to replace everything. This can be particularly important if you own a large, unusual or period property, or have valuable jewellery, art, antiques, watches, wine, collectibles or musical instruments.
A policy can look perfectly healthy on paper but still leave you short at claim time. Here is what to check before your next renewal.
Rebuild value
One of the most common misunderstandings in home insurance is the difference between market value and rebuild cost.
The market value is what your home might sell for. It includes the location, land, local amenities, transport links and other factors that influence what a buyer is prepared to pay.
The rebuild cost is different. It is the estimated cost of demolishing and rebuilding the property after serious damage. It may include:
- Materials and labour
- Demolition and debris removal
- Architects’, surveyors’ and other professional fees
- Planning and building regulation requirements
- VAT
- Specialist workmanship and materials
- The cost of restoring unusual or heritage features
Buildings insurance should normally be based on the rebuild cost, not the price your home might achieve on the property market.
That distinction matters. A home in an attractive location may have a high market value because of its land and setting, while its rebuild cost could be lower. But a complex property with specialist construction, bespoke features or restricted access might cost far more to rebuild than a standard house of a similar size.
T&R Direct’s guide to getting the right home insurance cover explains why buildings and contents should be valued separately.
Why costs change
Rebuild costs are not fixed. Materials, labour and professional fees can all change over time. A sum insured that seemed sensible when you bought your policy may not be enough several years later.
Home improvements can also make a difference. Perhaps you have:
- Added an extension or converted a loft
- Built a garden room, pool house or other outbuilding
- Installed a new kitchen or bespoke bathroom
- Replaced standard windows with specialist glazing
- Added solar panels or other energy improvements
- Altered the layout of the property
- Restored original features
Even if the outside of the home looks much the same, the cost of putting it back after a major fire or flood may have moved on.
And an online estimate or mortgage valuation is not always suitable for a high value home. These tools may not fully account for unusual construction, specialist materials, listed status, steep access, extensive outbuildings or the quality of the original workmanship.
For a complex property, a professional rebuild cost assessment can give you a more reliable starting point. It is also worth asking whether the policy uses index-linking, and how it applies between renewals.
Different homes
Not every high value home faces the same valuation challenge.
A listed property may need traditional materials and methods to meet conservation requirements. Handmade tiles, lime plaster, specialist timber or stonework are not always easy to replace with standard modern equivalents.
A period home may have unusual dimensions, original features or construction methods that are more expensive to reproduce. A property with a thatched roof, timber frame or other non-standard construction may also need a more specialist assessment.
An extended or architect-designed home can be difficult to value using a simple square-metre figure. Open-plan areas, bespoke joinery, large glazed sections, basements, bridges or specialist finishes may all affect the cost.
There is no single figure that works for every high value home. The important point is to avoid assuming that a standard calculator or an old valuation still tells the full story.
The average clause
The average clause can sound complicated, but the basic idea is straightforward.
If your property is underinsured, the insurer may reduce a claim in proportion to the shortfall. This is sometimes called applying “average” or a “condition of average”. The exact wording varies, so check your policy documents.
For example, imagine:
- The true rebuild cost is £1,000,000
- Your buildings sum insured is £600,000
- Your home is therefore insured for 60% of its rebuild cost
If you then have a covered claim for £100,000, the insurer may only pay 60% – £60,000 – leaving you to find the remaining £40,000, subject to the policy terms and the circumstances of the claim.
This can apply to partial losses as well as a total rebuild. So underinsurance is not only a concern if the whole property is destroyed. A serious escape of water, storm or fire claim could still expose a sizeable gap.
The same principle may apply to contents. If you insure the contents of your home for £100,000 but their true replacement cost is £150,000, you could be underinsured even if the items directly affected by a claim are worth much less than £100,000.
It is worth checking whether your policy includes an average clause and asking how it would work before you need to make a claim.
Contents count
A large home does not automatically mean you have expensive contents. Equally, a modest home can contain a surprisingly valuable collection.
High value contents can include:
- Jewellery and watches
- Paintings and other artwork
- Antiques and family heirlooms
- Wine collections
- Rare books and collectibles
- Musical instruments
- Cameras, computers and specialist equipment
- Designer furniture and rugs
Standard contents policies often include a single-item limit or “high risk items” limit. This is the maximum the policy will pay for one item unless it has been specifically listed or the policy provides a higher limit.
So, if a watch is worth £8,000 but your single-item limit is £2,000, simply including it within your overall contents figure may not be enough. The same could apply to a painting inherited from a relative or a violin used for professional performances.
A room-by-room contents inventory can help you spot these gaps. Remember to consider replacement cost rather than what you originally paid. An antique bought years ago, for example, may cost considerably more to replace today – if a comparable item can be found at all.
Specialist cover
If your home, possessions or lifestyle are more complex than a standard policy is designed for, high value home insurance or high value contents insurance may be worth considering.
A high net worth home insurance policy may offer features more suited to unusual properties and valuable possessions. Depending on the policy, this could include higher single-item limits, broader contents cover, alternative accommodation, cover for collections and more flexibility around how a claim is settled.
That does not mean every valuable item automatically needs a specialist policy. But it does mean you should not assume that a standard policy will cover everything in the way you expect.
Pay particular attention to:
- Single-item limits
- Total contents limits
- Valuables kept in outbuildings or storage
- Cover away from home
- Worldwide cover for jewellery or instruments
- Security requirements
- Whether items are replaced, repaired or paid at an agreed value
- Requirements for alarms, safes or secure locks
Your policy may also require certain items to be professionally valued and listed individually.
Keep evidence
Up-to-date valuations are useful, but so are receipts and other evidence of ownership.
Try to keep:
- Purchase receipts
- Professional valuation certificates
- Invoices for restoration or specialist work
- Photographs of valuable items
- Serial numbers and identifying details
- Records of provenance or authenticity
- A secure inventory stored away from the property
You do not need to turn your home into a detective’s evidence room. But clear records can make it easier to prove what you owned and establish its replacement value after a loss.
Valuations should be reviewed periodically, particularly for jewellery, watches, artwork and collectibles. Values can move in either direction, and a valuation that was accurate several years ago may no longer be suitable.
Before renewal
Before your policy renews, it is worth working through this short checklist:
- Check the buildings sum insured. Is it based on a current rebuild assessment rather than market value?
- Review changes to the property. Have you added an extension, outbuilding, new roof or specialist feature?
- Recalculate your contents. Could you replace everything in the home at today’s prices?
- Check single-item limits. Are any jewellery, watches, art, antiques or instruments above the stated limit?
- Update valuations. Arrange new professional valuations where appropriate.
- Check security conditions. Make sure alarms, locks, safes and other requirements are still being met.
- Read the average clause. Understand how underinsurance could affect a claim.
- Tell the insurer about material changes. Do not assume that a previous conversation or old proposal form covers them.
Our guide to checking the small print offers a useful reminder to look beyond the headline premium.
The right balance
Paying for more cover than you need is not ideal. But choosing a lower sum insured simply to reduce the premium can create a much larger problem later.
Accurate valuations help you aim for the right balance. They can also make conversations with an insurer or broker more straightforward, especially where your home has unusual features or your contents include several valuable items.
T&R Direct offers a wide choice of home insurance options from a panel of leading UK insurers. If you are reviewing your buildings or contents cover, contact T&R Direct to discuss your requirements and find out what options may be available.
A few hours spent checking your valuations this autumn could help avoid an unwelcome surprise when you need your policy most. After all, the time to discover that your jewellery, artwork or roof was worth more than expected is preferably before the claim – not while standing in a queue with a clipboard.
About The Author: Penny
More posts by Penny