When shopping for buildings insurance, it’s important to know the difference between the types of policies you can choose from and how the premiums are calculated. There are two main types of buildings insurance:
Bedroom-Rated Buildings Insurance
These policies are based on the number of bedrooms in your home. Typically, the more bedrooms you have the higher the premium, regardless of the size or content. The cheapest option may be to cap the cover, which is cheaper, or go for unlimited cover, which will obviously cost you more. A bedroom-rated policy is useful if you don’t want the hassle of measuring the floor space in your home in order to calculate exact rebuild costs but do be aware that there may be a limit to the amount of cover provided.
Sum Insured Buildings Insurance
A sum-insured policy is calculated using an accurate rebuild cost. The rebuild cost (also known as the reinstatement value) is basically what it would cost to build your property again from scratch should it be destroyed through fire, earthquake, landslip, explosion or any other catastrophe that caused complete destruction of your home. If you’ve recently purchased your home you’ll find this figure on your homebuyer’s survey – this is quite different from the market value as it doesn’t include the value of the land your home resides on.
Getting a quote for this type of policy requires some effort on your part if you don’t have an accurate, up-to-date rebuild cost for your home. It’s crucial that the rebuild cost is accurate otherwise you could end up being under-insured which would be devastating should you ever have to claim. You can pay a chartered surveyor to accurately work out the rebuild cost for you and this is highly recommended if you’ve recently extended or modified your home.
Many providers index-link their policies, meaning that the rebuild cost is automatically updated to take into account the fluctuations in labour and build material costs. It’s very important that you notify your insurer if you intend to extend or improve your home so that they can update the rebuild cost on your policy accordingly.
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