Underinsurance - insurers trying it on?

[Aleaiactaest]

OK I admit to name changing for this and I might be being unreasonable but here goes…

Just had a classic leak situation in my house. A leaky pipe behind a kitchen cabinet leaking for months causing some damage into a utility room below, some flooring etc. Have quite expensive home insurance, renewed annually etc. - it is like £1000 a year.

When I bought the house 10 years ago the building surveyor stated rebuild cost would be max 500,000k. Every year since the building sum insurance has been adjusted upwards slightly. It is now at around 750,000k which seems loads. Especially because a similar house next door was built from scratch 5 years who for about 450k and all shiny new etc.

Anyway, the loss adjuster shows up and states we are massively underinsured because apparently in the last two years according to RICS March 2020 to 2021 build cost went up 8 per cent and March 2021 to March 20212 a whopping 18.3%. He has plucked the March figure although the loss was in August and the claim is only being addressed now.
So they are not going to cover the whole leak and will only cover around 70 per cent and they want us to pay to have the house revalued properly etc etc.

Thankfully we don’t have a big fire etc. and all destroyed. But just a word of warning to others out there that rebuild costs have gone up massively.
Or are they trying this on?
Are they really going to do similar to some poor family who have lost their house in a fire etc?

So if you over insure they can deny your claim?, is that correct?

I'd complain to your broker, this is what you're paying them for!

This. l’ve always over insured

I actually had an argument with our broker last month about the rebuild value when I was renewing our buildings and contents insurance: it was something silly like £300k and I said that was ridiculously low. She asked how much a similar house would sell for and I said the house opposite (like ours: the upper half of a Victorian stone villa but without the converted loft that we have) had sold recently for c£400k - but that that had zero correlation with rebuild costs.

She then quoted me a renewal cost that was high, with a slightly increased rebuild cost but I still considered the rebuild cost too low.

Anyway, I went and searched and found the RICS calculator. Plugged in the details (stone built three foot thick sandstone walls slate roof, first floor and attic floor and entrance on the ground floor, in a conservation area) and it came out at close to £1million - I even had to slightly underestimate as the on-line calculator couldn't cope with I think the combination of size and being over 3 floors.

Plugged it into a comparison website and found buildings and contents insurance with Tesco Bank for half what the broker had quoted Re-build cost is unlimited so I'm confident we're covered. And yes, I've read the fine print of the policy

Plus I know that our downstairs neighbours also have good insurance, so that should the worst happen and our house be raised to the ground for whatever reason, between us we're more than covered to get it rebuilt

So if I under insure they pay less of the claim and if I over insure they don't may more than the claim, what a scam, how do they get away with this.

Yes if they think you've done it on purpose to defraud them. If you say your house is worth double what it is and claim that your kitchen would cost £40k to replace, (when actually it was IKEA and would cost £10k to replace).
I don't think they'd worry if you overestimated your rebuild costs by a couple of thousand though. But wise to use the calculator.

If you underinsure then you pay less premium than you should.

Hi OP, we're on the downward side of an insurance claim for similar damage at DMIL's house, the insurance company have never queried the house valuation. MIL had a hidden leak behind vanity units in the upstairs bathroom and it caused major damage (rot etc in floorboards ) I'd keep querying what the relationship is between the value of the building and the value of an (interior) claim. I'd also suggest maybe cross posting in Legal or asking MNHQ to move the thread for you

If you overinsure you pay a higher premium than you should.

"I'd keep querying what the relationship is between the value of the building and the value of an (interior) claim. I'd also suggest maybe cross posting in Legal or asking MNHQ to move the thread for you"

This is well meaning but ultimately pointless advice. The condition of average doesnt apply separately to different parts of the policy, you dont pay separate premiums for separate contracts to insure buildings and contents, you have to pay the correct premium for the policy and if you haven't because of under insurance then average applies to any property claim irrespective of what property is under insured.

This is a basic principle of insurance. You can't base the contract on sums insured lower than reinstatement / replacement costs as then you're not paying a fair premium, if this was allowed then people would regularly under insure, premiums would be artificially low, claims would still be paid at the same level, and insurance companies would quickly to bankrupt or stop writing property.

If you were allowed to claim more than the value of your damaged property because you were insuring for more than they were worth, then this would clearly lead to fraudulent claims (already billions per year). People would insure their property for much more than it was worth then damage it.

It's a basic principle of insurance law and claims settlement that policyholders pay a premium that is proportionate to the risk (ie based on the correct sums insured) and put policyholders back in the exact same financial position as they were in before the loss.

Lots of household policies have various inflation protection built in for example my insurance policy has rebuild costs banding, eg up to £1m so you dont have to pick a specific rebuild value

Nonsense. My rebuild cover is I million (standard) and my annual premium is just over £100. Compared to OP''s £1000.

It's cheap because my property, security and claims history makes me a golden client to insurers. At every renewal I go to a comparison site and let them fight/beg for my business.

The insurers are being (relatively) reasonable, your brokers have f*cked up by not advising you up your coverage.

Your brokers will have professional indemnity cover to claim against so I would start discussions about them covering the shortfall on the repairs and if a polite conversation with a senior partner doesn’t get you anywhere, it will be time to take legal action against the broker.

I've checked my cover and the buildings element is unlimited.

Yes, I think that is the safe way to do it! Always get unlimited buildings cover. Especially in this climate.

The thing is my general insurance fact sheet states “unlimited buildings cover as standard unless agreed otherwise”. The broker never highlighted that they went out and got a limited cover “agreed otherwise” and deviated from the norm. And I am paying a big premium. It is all a little strange. Also my new insurer took over my previous insurers book of business because the previous insurance stopped doing it. It is all rather strange and confusing. When I try to call up the new insurer it says it is a commercial insurer.

Unlimited cover is the way to go to stop these bastards trying to wriggle out of the claims.

Underinsurance is a big issue for insurers at the moment because rebuild costs are dramatically increasing and showing no signs of slowing down.

It isn't a try on. It is a clear question that is important to ensure insurers have sufficient money available - it directly impacts premiums.