Understanding your sum insured for home insurance is one of the most important aspects of your insurance policy. After all, it’s the amount you’ll rely on if something goes wrong, like a fire, flood, or other unexpected event. Getting this right means the difference between being fully covered or facing a hefty financial shortfall. Many homeowners mistakenly think they’re covered for the property’s market value, but that’s not always the case. In this blog, we’ll explain why and, most importantly, how to make sure you’ve got exactly the right cover for your property.
Sum Insured Meaning: What You Need to Know
The sum insured is the maximum amount your insurer will pay if your home is damaged or destroyed and needs repairing or rebuilding. In the context of home insurance, this is crucial — it ensures you’re covered for all rebuilding costs, including labour, materials, and even clearing debris after an event like a fire or flood. It’s important to note that your home insurance sum insured isn’t the same as the market value of your home; instead, it’s based on what it would cost to rebuild the property from the ground up. These two figures can be very different, which is why it’s so important to know the difference between them.
Getting the sum insured wrong could leave you underinsured, meaning your policy won’t cover the full cost of rebuilding or repairing your home if the worst happens. Thankfully, it’s not a guessing game, and there is help! Seeking professional guidance from experts like RebuildCostASSESSMENT.com can help you make an informed decision and ensure your coverage is sufficient.
How to Calculate Building Sum Insured
To calculate your building sum insured, you need to consider several factors beyond just the size of your property or its current market value. The cost to rebuild includes labour, materials, and fixtures, but it also factors in your property type and location. While a building sum insured calculator can give you a rough estimate, these tools aren’t always 100% accurate.
For standard properties, services like RebuildCostASSESSMENT.com offer desktop assessments that provide accurate rebuilding cost calculations. This ensures your sum insured reflects the true cost to rebuild, not just the market value, helping you avoid underinsurance. Proper calculations protect your home and financial security, leaving no gaps in your coverage.
Got a lovely listed building or a property worth over £5 million? We can also help with on-site assessments to ensure you’ve got the right amount of cover for your unique property.
Understanding Declared Value vs Sum Insured
The terms declared value and sum insured are often confused, but they serve different purposes. The declared value represents the estimated cost to rebuild your property at the start of the insurance period without (and here’s a really important part) factoring in inflation. The sum insured, on the other hand, is the maximum amount your insurer will pay out in the event of a claim.
When inflation raises the cost of your repairs or rebuild, this can leave you short on coverage, which is why many British Insurers include the ‘Day One Uplift clause’ in their policies. To help homeowners avoid surprises due to inflation, this clause means that your insurer will automatically adjust for inflation as time goes on. Percentages vary depending on individual policies but are generally between 10% and 50%.
For instance, let’s say the declared value of your home is £200,000, but with inflation, the cost to rebuild could rise to £220,000. Without the right level of cover, you could find yourself underinsured. However, if your policy includes a Day One Uplift clause for 20%, your sum insured will rise to meet up to £240,000.
Brian Patel knows this only too well after his home was destroyed in a fire. He bought his home in 2020 and had a rebuild cost assessment done at the time. His property was insured for £180,000, but due to inflation over the last few years, his rebuilding costs rose to more than £200,000. As he wasn’t protected by the Day One Uplift clause, he was out of pocket for the additional costs. This was an expensive oversight, and Brian isn’t alone. According to our research, more than 76% of UK properties are underinsured.
Don’t put yourself in this position — be sure to always have an up-to-date rebuild cost assessment, and ask your insurer about the Day One Uplift clause.
Role of Chartered Surveyors in Valuation
A chartered surveyor, particularly one accredited by RICS (Royal Institution of Chartered Surveyors), plays a vital role in determining an accurate rebuild cost and having the correct sum insured value. At RebuildCostASSESSMENT.com, we offer an expert-built online tool that makes your rebuild cost assessment quick and easy — getting you the right coverage super fast and giving you the ultimate peace of mind.
For unique or high-value homes that aren’t covered under standard construction estimates, our experts can also conduct on-site evaluations to ensure a truly reliable figure. This thorough assessment ensures that the valuation reflects the true cost of rebuilding your home, including all fixtures.
Importance of Accurate Home Contents Valuation
Many homeowners focus on insuring the structure of their home (and this is often legally required by your mortgage provider), but what about the items inside? Accurately valuing your home contents is just as important. Underestimating the value of your belongings can lead to underinsurance — just as undervaluing your property can — meaning if something happens, your payout might not be enough to replace everything.
Tools like a contents calculator can help you figure out the average contents sum insured value for your possessions. This covers everything from furniture to electronics and even clothing. Imagine having to replace your entire wardrobe, TV, and other gadgets after a disaster — it adds up quickly!
Regularly updating your contents valuation ensures you stay protected as your possessions change over time, such as when you update your furniture or upgrade to that large-screen TV you’ve had your eye on. Using reliable tools and services will give you peace of mind, knowing your home and everything inside it are fully covered.
Market Value, Rebuild Costs and Your Home Insurance Policy
As we’ve already mentioned, when insuring your home, it’s important to focus on the actual cost to rebuild the property, not just its market value. The home rebuild cost includes everything from labour and materials to fixtures and professional fees like architects. Using a rebuilding cost calculator can give you a rough idea, but beware — these tools can sometimes be inaccurate, especially for older or unique properties.
Trust the Experts: That’s why it’s important to have your rebuild cost assessment done by the experts. RebuildCostASSESSMENT.com is regulated by RICS (Royal Institution of Chartered Surveyors), which means you can be confident about our expertise.
Underestimating costs when using inaccurate calculators can leave you dangerously underinsured. For instance, you might insure your property for £200,000 based on a general online calculator, only to discover the real cost to rebuild is £250,000 after a disaster. This £50,000 gap could leave you unable to complete the rebuild of your home and result in financial ruin. It’s a scary thought! To avoid these pitfalls, seek professional advice or use services like RebuildCostASSESSMENT.com to ensure you’re properly covered.
Don’t leave it up to chance or guessing games. By consulting professionals like RebuildCostASSESSMENT.com, you can avoid the risks of underinsurance, making sure your coverage is spot-on. Get in touch with us today for your desktop or on-site assessment.
Other Helpful Resources
Important disclaimer: The information provided here is for general informational purposes only and is not intended as professional advice. While we strive to ensure all information is accurate and up-to-date, the content may not reflect the most current legal or regulatory developments, standards, or practices. No representations or warranties are made (express or implied) about the accuracy of the information provided, and reliance on this information is strictly at your own risk.
We do not offer financial advice and nothing within this content should be construed as such. We recommend consulting with a qualified professional who can provide tailored advice based on your individual circumstances before making any decisions related to insurance.
Please note that we are not regulated by the Financial Conduct Authority (FCA) and as such, are not qualified to provide specific financial or insurance advice. Please see our footer for further information about us, including our website terms of use, privacy policy and more.