16/05/2022
Is your thatched property underinsured?
Accurately estimating how much it would cost to rebuild your home is a tricky business. This is especially the case if you have a thatched home that requires specialist skills and materials to repair or restore it, as this can make your rebuild cost much higher than that of a standard property.
However, getting an exact estimate is vital if you want to protect yourself from the risks of underinsurance.
What are the risks of being underinsured?
If you are underinsured and the worst was to happen, your insurer is very unlikely to pay the full bill for repairing or rebuilding your home.
This is because the sum you are insured for is directly based on your estimated rebuild cost. If your estimate is too low and your house needs to be completely rebuilt, your insurer will only pay out your insured sum. The rest of the bill will need to be footed by you.
For instance, if your home was insured for the sum of £200,000 but the actual rebuild value is £250,000, you will need to find an additional £50,000 in order to restore the entirety of your home.
If your home is damaged and you put in a claim of partial loss, you could also find yourself reaching into your own pockets if you are underinsured.
This is because something called the ‘condition of average’ may be applied if the sum insured by your policy is lower than the actual cost. If this is the case, your insurer will apply an average, which will reduce the claim payout in proportion to the level of underinsurance. Be sure to check your policy wording to find out if this applies to your cover.
Condition of Average Example
You insure your home and contents for £200,000 and then make a claim for £50,000 after a fire in your thatched home.
However, your insurer finds that the total value of your home and contents is actually £250,000.
This means that your insurance policy only provides cover for 80% of the total.
As a result, the insurer applies the condition of average, which means that they will only pay out 80% of your £50,000 claim. This gives you an insurance payout of £40,000, leaving you to find the remaining £10,000 to carry out repairs.
How can underinsurance happen?
Underinsurance can happen for a number of reasons.
Firstly, when working out the rebuild cost it is quite easy to overlook the potential payments needed to cover:
- Professional fees or skilled craftspeople
- Clearance of the site
- Requirements of public authorities or organisations such as Historic England, which may be relevant if you have a listed property
- Specialist materials, such as the straw for your thatched roof
- Luxury fixtures and fittings
Inflation and rising costs can also lead to rebuild estimates falling short.
Materials and labour costs have risen at an alarming rate over the last few years due to disruption caused by the pandemic and the effects of Brexit, which have delayed shipments. A lack of HGV drivers and construction workers has only worsened the problem, which looks set to continue for the foreseeable future.
Policies that are not index-linked during periods of high inflation therefore carry the risk of underinsurance occurring because costs have risen since the policy was taken out.
How can I prevent underinsurance?
Due to the uniqueness of your home and the rising costs of building materials and labour, it is a good idea to seek specialist help when putting together an estimate for your rebuild value. This way, you can reduce the risks of underinsuring the property while also avoiding an overestimate that could lead to a needlessly expensive premium.
Homeowners can usually get reliable estimates from the online calculator of RICS (Royal Institution of Chartered Surveyors), but the unique features of thatched properties make this unsuitable. This is because its estimates are based upon standard building materials.
At One Broker, we use desktop surveys by Barrett Corp Harrington (BCH), which take the unique needs of thatched properties into consideration. This helps us to create a policy based upon a suitable rebuild cost.
Get the right level of protection
Thanks to our relationship with BCH, we are able to give you access to a Benchmark desk-based valuation service for just £85+VAT.
By expertly surveying your home, they will be able to provide an accurate estimate of a rebuild cost, including the costs of clearing the site and any professional fees associated with the reconstruction process.
We can use that rebuild cost, along with our knowledge of the sector, to provide you with an accurate insurance quote.
If you would like to talk to us about your thatch insurance requirements, get in touch with us on 01603 788050 or email us at john.albion@onebroker.co.uk.
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