building insurance...

[dilbertina]

Have posted in Property and Legal as I was not sure where I might be more likely to get a response...!

We are in the process of buying a grade2 listed 400yo thatched cottage. The Building Society Valuer has been in and valued it at price we're paying, with a "rebuild" insurance figure of £375k. We were planning on using the building society own insurance policy.

We also independently have had a full building survey carried out by a surveyor specialising in period and thatched property. I asked him to provide a figure for rebuild for insurance and he has given figure of £620k (which is well in excess of purchase price but probably more realistic).

This is obviously a huge disparity. If we go for the Building Society insurance and their "rebuild" figure is totally insufficient and then the worst happened and the house needed rebuilding what would happen? Would they only pay up to £375k and would we or their surveyor (via indemnity of some kind presumably) have to pay the difference?

Many thanks in advance for any advice, it's obviously not something we can ask the building society without ringing alarm bells!!

How much are you buying the house for?

Houses generally cost less to rebuild than what you buy them for on the market.

I've just reinsured, and for years the rebuild cost was less than purchase price, but I questioned it this year and because we are a Victorian sandstone house on an awkward site, the rebuild cost (and premium) is much higher, as I suspect the OP's will be.

Not an expert but I think the answer to your initial query is that you'd have to pay the difference if the worst happened. What's more likely though is that any claim you make - not just for complete rebuilding - would be reduced proportionately because you were underinsured.

Purchase price 540k. Since it is listed it would have to be reconstructed using original methods etc which is why it would be expensive and not necessarily less than price of house to do.

If I hadn't done the independent thing I wouldn't even know I might be potentially massively under-insured. Does this mean potentially many people might be under-insured even though the building society/insurance company has used a figure from their own approved surveyor, but the property owner has to make up shortfall?

Ours is more than the house cost. Not had a problem getting insurance that way round though.