Investing in bricks and mortar is as solid as you can get, isn’t it? Whether you have made an investment to secure the ownership of your own home or have a buy to let type mortgage, it is highly unlikely that you will ever have to rebuild the dwelling from scratch. Nevertheless, this is an eventuality that some homeowners and landlords face each year. House insurance is not just for accidental damage caused to the fixtures and fittings, but should provide adequate cover in the event that the entire building is destroyed. Household insurance really ought to include provision for the entire home being burnt to the ground.
For landlords, building insurance is absolutely necessary. Many policy types that are specifically designed for landlords will stipulate regular checks are made that minimise the risk of the worst happening. Some of these are the legal responsibility of landlords, in any case. For instance a landlord’s building insurance policy will often say that you must conduct an annual gas check. It might include an electrical inspection, too. If you undertake regular inspections of the roof, water works and other potential problems areas, the costs of your premiums will usually reflect this. Nevertheless, should the worst happen and the building is devastated you will be glad of adequate cover. For landlords, this may include the potential costs you will incur placing your tenants into temporary accommodation whilst the dwelling is made up to a sufficient quality where it can be inhabited again.
For both landlords and homeowners, it can be a bit tricky to know how much to insure yours building for. After all, you know what you paid for the property and you will probably have a good idea what that constitutes under the present market conditions. However, that figure will include the price of the land under a freehold. For leaseholders the overall value of property also includes an element that reflects the remaining time on the lease. House insurance does not need to reflect the value of the land. It should, however, cover the costs of demolishing any remaining part of a damaged home and rebuilding it from scratch.
Professional surveyors will be able to calculate this figure for you. This may be worth considering if you have an older home which you may have to rebuild in exactly the same way as it was, if your home is listed, for instance. Some homeowners simply guess what the figure might be. The problem is that this can leave you underinsured and, should the worst happen, mean you have to find thousands of pounds to complete repairs. A good idea is to consult the Royal Institute of Chartered Surveyors (RICS) which can provide assistance, although individual firms will charge for a consultancy.
RICS have calculator designed for UK homeowners and landlords that will come up with a figure that you should insure to, based on the information you put in. The service is run in cooperation with the Association of British Insurers. It is designed to make sure that you are not underinsured and exposed to the risk of financial outlay at the just the last time when you would want to be. However, it is worth remembering that rebuild costs go up over time. This is not just that builders charge more for their services, with inflation, but that the cost of materials rises as well. All materials, from roof tiles to basics like cement have costs that fluctuate over time. Even if you have used a professional service or the RICS calculator before, it is worth checking your sums again the next time your home insurance renewal comes about.