Landlord Insurance - Don't let under-insurance ruin your investment

Landlord Insurance - Don't let under-insurance ruin your investment

They say that investing in property is as “safe as houses”, so you’ve taken the plunge and invested your hard-earned savings or pension money into a buy-to-let property.

However, not reviewing your Landlord Insurance policy sum insured could leave you in financial turmoil in the event of a fire, flood or other severe loss.

An incorrect sum insured can have a significant impact on your pocket!

When you insure a residential or commercial let property, you will be asked for a rebuilding sum insured which will form the basis of premium calculation and a core part of your contract with your insurance company.

As part of your Insurers standard protocols they will seek to review the adequacy of your sum insured in the event of a loss, should it be discovered that your property was “underinsured”, your claim will be subject to “Average”.

Any claims payment is likely to be reduced by the amount of the underinsurance.

For example, if you set a rebuilding sum insured of £150,000 and the actual rebuilding cost of the property is found to be £200,000, you will have under-insurance of £50,000.  

As such, your insurer will reduce the settlement payable by 25%.

Underinsurance Calculator

In the event that underinsurance exists, the calculation process is predetermined, with any claims payment reduced in direct proportion to a shortfall in the sum insured value.

(Sum Insured / Value at Risk)   x    Agreed Loss    =    Amount Payable (less any policy excess)

This issue is much more widespread than you might think, according to building insurance valuation specialists, Barrett Corp & Harrington, on average 77% of Properties they inspected were underinsured by 45%.

How would you cope if you needed to find £45,000 of a £100,000 claim?

What can be done to avoid underinsurance? A few suggestions

  • Make sure you insure your let property for the rebuilding value – NOT the market value
  • Review your sum insured at least every 3 years.  Don’t forget that any works or improvements you have made to the property could also have increased the rebuilding sum insured.
  • Speak to an RICS approved specialist building valuation service. Your Insurer advisor should be able to provide you with details and in many cases, discounted fees.
  • The Association of British Insurers (ABI), provides a free online calculator for residential let property via the Building Cost Information Service (BCIS)

FREE Landlords Insurance Review

Insync are Landlord Insurance specialists and will be happy to provide guidance to help you find the correct buy-to-let cover. Why not get an instant online quote or book a review with one of our Insync Gurus and we can help you to safeguard your investment.

Remove the Average Condition for Total Protection!

We can also arrange for insurers to remove the average (under-insurance) condition from your policy if you have recently had a valuation completed by an approved professional surveyor or valuation expert for complete peace of mind.